China is designing the framework of a budge system for the operation of state-owned assets and is hopeful it may be used on an experimental basis next year.

The budge system, jointly developed by the State-owned Assets Supervision and Administration Commission (SASAC) and the Ministry of Finance, aims to strike a good balance between expenses and income generated from the operation of the state-owned assets and clarify relevant liabilities.

Li Rongrong, minister of SASAC, said Friday that the framework of the budge system is likely to be built up within the year and would start trial operation next year.

It would be a crucial part of the new state-owned assets management and supervision scheme, which requires more transparency and market-driven practices.

Under the program, state assets supervisory agencies would be urged to do a better job and the state-owned enterprises (SOEs) themselves would also have to meet designated growth targets.

Li said that more regulations regarding the state-owned assets management and supervision are also in the pipeline.

SASAC plans to draft 24 such rules this year, including guidelines for the launch of board of directors at SOEs and recruitment of independent directors.

Some of the existing regulations will also be amended to catch up with market changes.

The ultimate aim is to improve efficiency and competitiveness among SOEs, Li said.

A more solid legal system would also curb irregularities during SOE reforms that have led to losses of state assets.

Since its launch last April, SASAC has been actively implementing its role as the sole representative of the state as the investor in some 190 of the largest SOEs.

Over the past year, it has developed a basket of new policies, covering everything from property deals to performance evaluation of SOE chiefs.

The State Council set a three-year timeline to develop a market-oriented system to manage state assets. The system is due by 2005 and will ultimately build up a shareholding structure at most SOEs.

To implement the reforms, state assets supervisory agencies have also taken shape at the provincial level and will be expanded to city and county levels within the year, said Li.

Central SOEs, who used to rely on monopoly and government support, have also felt mounting pressure to survive in the market competition.

Chang Xiaobing, vice general manager of China Telecom, said SOEs, especially the ones known as big brothers, have to get rid of some bad habits to compete with big multinationals in international markets.

China Telecom has just finished a US$1.7 billion H share refinancing program. International investors have pushed it to upgrade its operational standards, Chang said.

(China Daily May 29, 2004)