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China to Encourage Private Takeover of State Enterprises

By Sun Xiaoan and Wu Yiyi, China News Digest, 6 February 2001

[CND, 02/06/01] Chinese private companies are encouraged by the government to take over state-run enterprises that are in trouble, Reuters reported from Beijing on Sunday.

According to MA Jiantang, director of the general department of the State Economic and Trade Commission, China, after establishing initial policies in regulating privatization of state-run firms last year, is formulating additional rules to stimulate the takeover.

The government is drafting policies to stimulate non-state firms to either purchase, rent or lease state enterprises, said the director.

The new policies will provide tax cuts and easier access to bank loans to private enterprises that acquire ailing state enterprises. The policies are expected to expand the role of private enterprises in the economy, as well as solving the problem of laid-off workers from state-owned enterprises, said the report.

Last year, China issued rules that encouraged the development of private and small enterprises. The rules required banks to lend more to those enterprises and allow more of them to list in the stock market and issue bonds.

Currently, over 60 percent of China's annual gross domestic product (GDP) is from private companies and about 80 percent of the annual GDP is from those in the industrialized areas, such as Jiangsu, Zhejiang and Guangdong provinces. (SUN Xiaoan, WU Yiyi)