State-owned equity

Vice-Director Li said equity reform will play a pivotal role during the multifaceted campaign.

As a traditional industrial base, Jilin has a great number of SOEs, which used to suffer from shortages of capital and management inefficiencies.

Using investment from the outside is seen as an effective way to solve the problems. With new capital injected, managerial expertise is introduced, triggering further reform in SOEs.

To facilitate investment, the authorities hosted large-scale investment expositions last year.

Such promotional events attracted a great number of renowned companies from home and abroad wanting to involve themselves in the restructuring of local companies, Li said.

According to official statistics, 411 SOEs in the province have attracted 18.16 billion yuan (US$2.27 billion) in pledged investments, with 12.76 billion yuan (US$1.6 billion) already finalized.

In some cases, State-owned equity was transferred to the newcomers. Figures show that the State retains stakes in 117 out of the former 816 SOEs, with the rest becoming non-State-owned and joint stock companies.

These 117 companies have a combined State-owned equity of 3.98 billion yuan (US$500 million), accounting for 25.9 per cent of their total assets.

As State-owned capital retreated from small and medium-sized enterprises in some fields, the total number of SOEs reduced, Li said.

According to research on 483 newly restructured companies, capital contributed from the State reached 3.98 billion yuan (US$497.5 million), accounting for 25.9 per cent of the total registered capital of 15.38 billion yuan (US$1.92 billion).

Nevertheless, Li pointed out as State-owned enterprises clustered into key industries covering resources and infrastructure, their control in these fields strengthened, and their business structures were optimized.

Shouldering burdens

To promote SOE reform, the authorities helped local companies clear their financial burdens, Li said.

The government and asset management organizations have co-operated to set up a mechanism to solve the bad assets of the SOEs.

China Orient Asset Management Corporation has signed an intention letter with the SOEs to dispose of 13 billion yuan (US$1.6 billion) in bad assets.

The provincial financial bureau has exempted the companies from paying 2.9 billion yuan (US$362.5 million) of debts, Li said.

After these efforts, the asset-liability ratio of the restructured companies fell to 62.4 per cent, down 36.8 percentage points compared with the figure prior to restructuring.

Another heavy burden on enterprises is the operation of affiliated organizations.
In China, large SOEs used to take care of the operation of a number of facilities such as kindergartens, schools, hospitals and shops.

The operation of such affiliated organizations goes against enterprises' goals of pursuing profits and drained the SOEs.

To reduce the burden of the enterprises, the provincial government held conferences aimed at addressing the issue, Li said.

According to the authorities' arrangement, the responsibility of 110 schools and other organizations were taken away from 11 enterprises in the province.

After the enterprises' operations were streamlined, they were able to concentrate on their main businesses - production and sales.

Workers' interests

Workers' interests are given high priority in SOE reform, Li stressed.

Authorities have strengthened the administration of asset evaluation and audits, equity transactions, debt disposal and reform plan approval, he added.

To improve the transparency of decision-making procedures, the reform scheme, the staff relocation plan, and compensation standards, are all open to the public, inviting opinions and suggestions from the staff.

In addition to participation from the public, supervision from the provincial People's Congress and People's Political Consultative Conference is another guarantee of workers' interests, Li said.

Based on inspection tours and debriefings of the related governmental branches, members of the provincial People's Congress and People's Political Consultative Conference offered instructive suggestions for SOE reforms.

While some workers suffered the pain of being laid off as a result of the reform, more than 96 per cent of workers in the restructured enterprises kept their jobs.

At present, insurance and pensions were offered to 205,200 retired workers.

Friendly climate

"We will do our best to create a more friendly environment, seeking to promote SOE reform," Vice-Director Li said, adding that the provincial government had mapped out strategies for the promotion of deepening SOE reform.

According to Li, the authorities will also enhance support in fiscal policies and help enterprises strengthen their financing capabilities.

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