Bankrupt State firms to obtain no bailouts

China would end the practice of bailing out bankrupt State-owned enterprises (SOEs) within four years and force them to sink or swim according to market rules, domestic media quoted an official as saying.

"In four years, SOEs will follow market rules and apply for bankruptcy according to the same laws and regulations as foreign and private companies," Xinhua said, quoting Shao Ning, vice minister of the agency in charge of State assets.

Shao said the plan by the State-owned Assets Supervision and Administration Commission to force State companies to survive on their own merits had been approved by the State Council in February.

Domestic media had reported the plan to stop propping up SOEs earlier this year, but did not give a timetable.

The government had already been giving less money to poorly performing State-owned companies over the years, but continues to inject funds into other State firms it believes can restructure and become profitable.

To help badly performing SOEs retreat from the market smoothly, the Chinese Government has adopted a series of bankruptcy policies on employees¡¯ rights, asset management and bad loans.

Xinhua said 3,377 State firms with 6.2 million employees had been allowed to go bankrupt in recent years.

The move cost 49.3 billion yuan (US$6 billion) in subsidies with 223.8 billion yuan written off by State banks, said Xinhua. "There are still more than 1,800 SOEs to be closed down," Xinhua said.

So far, Beijing and Shanghai as well as Jiangsu, Zhejiang and Fujian provinces have halted government bailouts.

Source: Shenzhen Daily-Agencies