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Shenyang makes progress on SOE restructuring
By Wu Yong (China Daily)
Updated: 2004-12-22 09:03

SHENYANG: The capital of northeastern China's Liaoning Province is coming to the end of its hardest period in reforming its State-owned enterprises (SOEs), Mayor Chen Zhenggao said.

Statistics from the local economic commission show Shenyang now has around 280 State-owned enterprises, half of the figure in 2000, and two-thirds of the laid-off workers have found new jobs with government help.

Liaoning was a key industrial base from the founding of New China in 1949 and throughout the period of the planned economy, with its enterprises being core national industries and major sources of revenue.

But the rapid economic development in southern and coastal provinces since the nation started to switch to a market economy in the 1980s has seen this former economic powerhouse lag behind.

SOEs met great difficulties during the economic reform due to their lack of understanding of the market economy, slow reaction to market changes, rigid operating mechanism, government interference, large amount of surplus labour and changes in government policies regarding SOEs.

Many enterprises went bankrupt and tens of thousands of workers were laid off.

But Chen pointed out this is no longer the case in recent years when the northeastern revitalization strategy issued by the central government in 2003 accelerated the pace of reform.".

Over 300 State-owned enterprises have changed their ownership through merging, establishing shareholding systems and introducing both domestic and foreign investment.

New systems meeting the demands of the market economy, have revitalized the State-owned sector and some enterprises have achieved encouraging results.

The Shenyang Machine Tool Group, a giant of the national machine tool industry, merged last month with Schiess AG, a well-known German firm.

Official statistics show existing SOEs mainly focus on key industrial areas involving machine tools, aircraft and engine manufacturing, the city's pillar industries and some backbones of the national economy.

The central government has provided these firms with preferential policies to ensure their normal operation, helping them to improve their technology and equipment and encourage them to play an international role.

These policies include tax reforms and the establishment of a social security network.

"State-owned enterprise reform cannot succeed alone without the support of the robust development of private economy," Chen said.

Great economic benefits and job opportunities created by the private sector have greatly eased the pressure brought by SOE reform, Chen said.

According to official statistics, about 520,000 workers lost their jobs during the reform process by 1999, 7 per cent of the city's total population.

That means most families had one or even two members who were not working at the time, said Li Jie from the Shenyang Labour and Social Security Bureau.

Statistics show there are about 270,000 small and medium-sized enterprises currently operating in the city.

These enterprises, mostly privately-owned, provided 1.3 million jobs by the end of last month.

The private economy witnessed unprecedented growth this year. The total registered capital of privately-owned enterprises reached 42 billion yuan (US$5.06 billion) in the first ten months of this year, a year-on-year rise of 38.6 per cent.

These enterprises fulfilled a combined output value of 43.5 billion yuan (US$5.24 billion), a 12 per cent increase year-on-year.

Chen told China Daily the private sector is now the largest tax payer in Shenyang, handing over 8.06 billion yuan (US$970 million) to the local tax bureau between January and October this year, accounting for 52 per cent of the city's total tax income during the period.

"The reform of State-owned enterprises can only succeed through the joint efforts of the government, State-owned enterprises and the private sector," Chen said.

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