This was the message at the second annual meeting of the State Assets Operation Forum held in September in Shanghai. Respected Chinese economist Fan Gang delivered the keynote speech setting out his views on a future state assets management system.

The forum attracted senior officials from the Ministry of Finance and the Shanghai municipal government. Also present were senior executives from 24 companies responsible for managing state assets and experts in the field like Fan Gang, Wei Jie and Hua Min.

It is hoped that the event will have helped facilitate reform in state owned enterprises (SOEs).

Administering State Assets

The October 1998 founding of the State-owned Assets Administration marked the beginning of a new round of reform in the management of China’s state assets. Recognizing the important place occupied by this reform in the context of China’s overall economic reform, the State Economic and Trade Commission and the Economic Restructuring Office of the State Council recently initiated relevant research.

Delegates said they expected the new state assets management system would be established by the end of this year. It would adopt a model in which central government would own the state asset but operate the asset with the cooperation of local government.

Fan Gang called for an institution to administer state assets. It must represent the public interest. To do so it must shoulder the responsibility of not only guaranteeing the security of state assets but also of ensuring that they are appreciating assets.

In order to promote reform and optimize contacts with other government departments, he suggested that as an interim measure the institution should be established as a government department.

Fan Gang holds that this public institution should not only insure the good use of capital resources but should also have a role to play in maintaining the balance between the supply of goods in the private and public sectors.

Fang said, “At a time when goods and services provided directly to the public such as basic facilities, public services and social security are in short supply, those responsible for state assets should increase this supply by reallocating capital earmarked for industrial use. Their goal should be for growth in state assets while at the same time optimizing public interest rather than profit.”

He said, “The ownership of state assets resides with both central and local governments. Local governments should be responsible for the local state assets and have state assets management companies to manage the funds on their behalf. These companies should operate at the funding level only and not get involved in activities at the enterprise level.”

Towards a Unified System

Liu Jipeng is a well known Chinese economist. He noted that SOEs are currently administrated by a whole array of different organizations like the Ministry of Finance, the Ministry of Personnel, the State Development Planning Commission, and the State Economic and Trade Commission. Considering this chaos he suggested that China should set up a state-owned Assets Supervision Commission to unify responsibility for finance, personnel and decision-making in a single organization.

According to Liu, central and local governments should administrate their respective state assets separately. He called for a new state assets management system to be established. In this system, the state assets operation company would ensure best use of assets by enterprises in the public sector.

The Shenzhen Experience

In 1994 Shenzhen began a fundamental reform of SOEs. A state assets management and operation system was set up in which the City State-assets Management Commission, the State-assets Operation Company and the relevant enterprises cooperated.

Following approval by the Shenzhen State Assets Management Commission, three state assets operation companies were established. These are the Shenzhen Investment Company, the Shenzhen Construction Investment Holding Company and the Shenzhen Business Investment Company.

Recently five state-owned enterprises including the Shenzhen Airport Group Co. were approved by the Shenzhen city government to operate state assets. These new pilot enterprises involve state assets of over 20 billion yuan (US$2.42 billion).

The five companies benefit from greater autonomy on matters of finance and personnel and in their decision-making generally.

For example if they need to reallocate or dispose of state assets, they just need to register the moves with the Shenzhen State Assets Management Commission instead of having to wait for approval.

(china.org.cn by Tang Fuchun, October 6, 2002)