The move is part of the defense industry authorities' reform and restructuring attempts to phase out the subsidy of loss-making enterprises, which will be required to get involved in market competition.

"The enterprises are allowed to enter the market economy and it is vital for them to prepare for the changes,'' Liu Jibin, minister of the Commission of Science, Technology and Industry for National Defense, told a working conference in Beijing on Tuesday.

As the state gradually relaxes its grip on industry, enterprises are free to make money from markets.

"Shareholding reform is the best solution for loss-making enterprises, which are now a common member of the market and no longer the apple of the state's eye,'' Liu said, outlining the work facing the commission's enterprises over the next five years.

The commission embarked on ownership reform for some of its businesses years ago and at present, 10 giant groups engaged in nuclear energy, satellite launching and aeroplane and ship manufacture have been set up.

Forty percent of the other enterprises under the commission, which were set up for national defense purposes and have now been in production for civilian use since the 1980s, were state-owned and have gone into the red because of traditional modes of operation and management in the planned economy.

According to Liu, the state subsidized 1.7 billion yuan (US$205 million) in 2000 for unprofitable enterprises, and will stop in years to come.

China is expected to put international cooperation in the civilian utilization of defense industries at the top of its list of priorities.

"The Chinese government will continuously lend its support to international exchanges and cooperation in space technology, space applications and space science,'' Luan Enjie, vice minister of the commission, told more than 300 industry insiders nationwide at yesterday's conference.

The priorities are:

1. Actively enhancing multilateral cooperation in space technology and applications in the Asia-Pacific region, and promoting regional economic growth and environmental and natural calamity monitoring with space technology.

2. Supporting Chinese space enterprises to participate in international space commercial launching services in line with the principles of equality, equity and reciprocity.

3. Giving support to using China's mature space technology and space application technology to carry out cooperation with other developing countries and provide services to cooperating countries on the basis of mutual benefit.

(China Daily 07/04/2001)