Overseas investors are expected to become shareholders in key State-owned enterprises (SOEs) as a result of the government's decision to promote Sino-overseas cooperation to push the reform of SOEs.

The State Development Planning Commission (SDPC) said on Monday the government is planning to sell a certain amount of SOE shares to foreigners over the next five years to speed up the restructuring of SOEs.

Overseas investors will even be allowed to hold the controlling stake in large SOEs, except for those of key importance to national or economic security, the commission said in the section of the 10th Five-Year Plan (2001-05) outlining the use of foreign capital.

The government will choose a group of large SOEs to be listed on overseas stock exchanges and encourage "strategic partnerships" between multinationals and Chinese businesses, according to the plan unveiled by the commission on Monday.

The plan outlines how the State will expand cooperation with foreign investors, gradually shifting its focus from attracting capital to advanced technology and management and special expertise.

The service industry, including banking, telecommunications, securities, insurance and tourism, will gradually become another focal point of cooperation. During the past two decades, China has mainly opened its manufacturing industry to overseas investors. And China will continue to encourage foreigners to invest in agriculture, basic industries, infrastructure construction and environmental protection.

Bai Hejin, president of China Academy of Macroeconomics Research under the SDPC, said China's WTO entry will boost the country's economic cooperation with foreign countries and investors.

"China's WTO membership has reduced risks and cost for foreign investors and more capital and advanced techniques and expertise will flow in," Bai said.

However, the country prefers foreign investors to start businesses in the western regions, where they will enjoy more favourable taxation policies for the next 10 years, according to last week's investment guidance made public by the commission, China's highest macroeconomic planning authority.

From 2001 to 2010, the enterprises' income tax will be 15 percent if they invest in industries that the government encourages.

(China Daily December 25, 2001)