The work of the asset and capital verification done in the central enterprises (the state-owned enterprises directly under the supervision of central government) since the end of last year shows that 181 central enterprises have suffered asset losses worthy of 317.7 billion yuan or US 38.4 billion US dollars, accounting for 4.2 per cent of the total assets. When adding the nearly 100 billion yuan or 12 billion US dollars in asset losses verified by the Ministry of Finance the bad assets of the central enterprises are made up of 5.4 per cent of the total assets.

When talking of the asset loss reasons on December 15 Li Yi, deputy director with the State-owned Assets Supervision and Administration Commission of the State Council, believed that of all the reasons and issues including the change of market environment, fiercer competition, restructuring and technical progress the most important one is caused by the lack of the control mechanism, poor supervision and administration within the enterprises.

He said there are mainly four reasons, which are given as below:

The first is poor management with loose financing discipline. The links involving purchase, production, marketing, financial affairs and market forecast are short of coordination, causing severe losses in the areas of account receivable and stock.

The second is wrong investment. Blind investment was made as there was short of market research and scientific demonstration. Because of this ineffective investment was made, causing bad assets and huge losses.

The third is irregular accounting calculation. Weak accounting causes poor accounting in cost, depreciation and profits.

The fourth is the bad management within the enterprises. There is not a strict supervision system with imperfect checkup and lack of an examination system of asset losses.

Li Yi stressed that weak risk management and lack of a risk prevention system are also the important reasons attributed to the asset losses. Some seek investment while lacking risk-preventing financial measures such as high debt rate and low circulation; others are not strong in risk-preventing awareness when engaging in the businesses of securities, futures, stocks and foreign exchange. In addition some underestimated the cost and risk when purchasing and merging with enterprises.

He urged the relevant departments to do a good managerial job in the follow-up work of asset and capital verification, establish and optimize budgetary management work, set up a risk-controlling system and enhance internal examination. Responsibility should be sought after when causing losses in violation of the related regulations.

By People's Daily Online