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CHINA: Provinces Press on with Privatisation

by James KyngeFinancial Times
November 6th, 2003

The provinces of Sichuan and Yunnan are planning to put up roughly 1,000 local state-owned enterprises as candidates for acquisition or merger with foreign or private Chinese companies starting next year, senior provincial officials told the Financial Times.

The initiatives by Sichuan and Yunnan - home to a combined 130m people living in the southwest of China - are indicative of gathering activism across the country to sell down stakes in state-owned companies, thereby providing a vast new opportunity for foreign and private investors.

If the sale of such stakes proceeds smoothly, the size of China's non-state economy will grow significantly, officials and analysts said.

The move coincides with the imminent establishment of more provincial branches of the State Assets Supervision and Administration Commission (Sasac), an official body set up to oversee greater separation of government from business.

Huang Xiaoxiang, vice-governor of Sichuan province, said his province would "very soon" set up its Sasac branch to facilitate the province's strategy of reforming all of its SOEs, changing their ownership structure and streamlining their employee numbers.

Mr Huang said that more than 500 SOEs in his province would be available for acquisition, merger or for the sale of strategic stakes to foreign or private companies. He mentioned that Changhong Electrics, one of China's largest television makers, and Wuliangye Distillery, a diversified drinks maker,are two companies planning to diversify their ownership.

Shao Qiwei, vice governor of Yunnan province, said that more than 400 local SOEs are to be prepared for ownership change over the next year, mainly in the fields of metals, mining, building materials, coal, tourism, sugar, tea and other agricultural processing. The total assets of these companies come to Rmb110bn ($13bn).

Mr Shao said he imagined that by the time the ownership restructuring was finished, some 30 per cent of these assets would have been transferred to other companies or to existing workers. He added that by 2005, some 50 per cent of the provincial economy would be in non-state hands, up from around 30 per cent now.

"This is a very big opportunity for investors looking for a way to enter the market of the west of China," Mr Shao said in an interview.

Asked if the local government was concerned about loss of influence after it sells down its stakes in state enterprises, Mr Shao said that it was government policy these days to "return the influence to the people". The government's duty, he said, was to create a level playing field and a conducive environment for the flourishing of business and to ensure transparency.

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