China: State companies urged to pull out (fwd)

[Stephen E Philion <philion@xxxxxxxxxx>]

SCMP

Thursday, November 9, 2000

State companies urged to pull out

DANIEL KWAN

State firms should withdraw from most mainland industries, a research
report by the National Bureau of Statistics recommends.

The report identified 196 industries and said state firms should withdraw
from 146 of them, Xinhua reported. Of the remaining 50, the state should
keep "control" of 35 and a "monopoly" in 15.

The Shanghai-based China Securities newspaper said the 35 industries over
which the state should maintain control could be grouped into three
categories: mining, including coal and minerals; hi-tech businesses like
aerospace that could have a direct bearing on the country's
competitiveness; and "pillar industries" such as cars, electronics and
petrochemicals.

The report said industries from which the state could withdraw gradually
were those which were not capital or technology-intensive, such as
textiles, food and beverages, and home appliances.

It explained that companies in these lines of business could improve
through market competition. Defence and electricity would both remain state
monopolies.

The National People's Congress passed a constitutional amendment in March
last year affirming the role of the private sector in the economy. The
amendment followed a decision made by the Communist Party congress in late
1998.

Foreign economists have said that the concession by the Communist Party,
which technically still claims to be a party of the proletariat, is already
a done deed.

They pointed out that after two decades of economic reforms, state firms
had lost much of their superiority in most businesses.

Huge privately owned companies and joint ventures with international firms
had taken control of more than half of the economy on the mainland.

Despite their steady decline, state firms often still enjoy advantages over
private businesses in areas such as obtaining bank loans.