WSJ.com - China Sets Financial Goals For State-Run Firms

China Sets Financial Goals
For State-Run Firms

By ANDREW BATSON
DOW JONES NEWSWIRES
December 17, 2004; Page A12

BEIJING -- China's central government has set financial targets for 30 of its biggest state-owned enterprises, the first step in a new system of stricter supervision of state companies' performance.

The State-owned Assets Supervision and Administration Commission, which oversees the central government's interests in the 186 companies it directly owns, said it will require the 30 companies to achieve revenue growth of 8.4% during the 2004-06 period, as well as a 10.48% appreciation in the total value of their assets. The aggregate profits of the 30 companies are targeted to increase 2.1% in 2005 to 82.36 billion yuan ($9.95 billion).

The companies in the initial experiment are mostly in heavy industry, such as shipbuilding, metals and energy. China has a long and mostly undistinguished history of trying to improve the management of its state-owned enterprises by setting administrative targets. The latest twist seems to put a new emphasis on top managers taking personal responsibility for their companies' business performance.

The top executives at state companies are usually civil servants appointed by the government. A successful run at a big state company can lead to a promotion to a governorship or other government post.

The fundamentals of that system seem unlikely to change. In remarks that weren't formally issued by SASAC, but were reported by state-run newspapers, Li Yizhong, the commission's No. 2 official, said management buyouts won't be permitted at large-scale state companies. Though China in recent years has privatized thousands of local-government-run companies, the central government has kept tight hold of those under its control, which are regarded as strategically significant.

Write to Andrew Batson at andrew.baston@dowjones.com

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