Published: 2008-06-18

From New, page 4, issue no. 371, June 9, 2008
Translated by Ren Yujie
Original article: [Chinese]

China's Ministry of Finance would revise its expenditures under the 2008 budget and finalize a financial support package for state-owned enterprises (SOE) that suffered losses in the recent Sichuan earthquake.

The Ministry suggested that SOEs with minimal damages cover their own while those suffering huge losses would be allocated reconstruction funds, to be decided by the State Asset Supervision and Administration Commission (SASAC) later, according to an internally circulated brief obtained by the EO.

The amount of financial support - to be drawn partly from funds submitted by SOEs themselves for profits made through state assets operations in 2007 - was pending further discussions between the SASAC and National Development and Reform Commission (NDRC). 

The brief also mentioned that private enterprises affected by the May 12 earthquake were also under consideration by the Ministry for financial support. However, the foremost task would be to ascertain the exact losses and funds required by enterprises to recover.

It was learnt that the Ministry had started drafting a reconstruction and recovery plan for central government controlled SOEs (hereafter as central enterprises) four days after the quake.

Initial data from the field revealed that at least 30 billion yuan in losses were registered by such enterprises scattered in Sichuan, and with heavy damage reports especially prevalent in Deyang and Mianyang counties.

Based on SASAC statistics, there were three central enterprises with headquarters and over 50 with subsidiary companies and agencies in Sichuan Province. Around 3,000 workers at these enterprises were dead, injured or missing after the quake.

In terms of hardware damages, the electricity supplies, communication facilities, factory buildings and equipment were destroyed. Among those affected were Dong Fang Electric, China Erzhong, ChemChina, Panzhihua Steel, Sinohydro Corporation, State Grid, China Telecom, China Mobile and China Unicom.

Dongfang Stream Turbine Plant, for instance, ceased production after the quake following serious damages, including 378 casualties. The plant's production lines and manufacturing equipment were destroyed along with factory buildings, offices and staff dormitories.

Based on an initial estimation by SASAC, overall losses of central enterprises stood at 30 billion yuan, however, the amount needed for reconstruction and recovery were yet to be calculated.

Under a recent law, this year is the first year for central enterprises to hand over their 2007 "bonus earnings" to the state. SASAC director Li Rongrong had revealed that the bonus would amount to roughly 60 billion yuan.

This amount would add to the coffers of the state assets operation budget, but how much of this budget would be appropriated for the reconstruction of quake-hit central enterprises had yet to be decided.

According to the aforementioned internal ministerial brief, there were various special funds available to help affected SOEs, including subsidized loans under the central enterprises basic construction fund, the countryside market development fund (named Ten-Thousand Villages Project), and the surplus fund from post-migration project related to settlements relocation due to reservoir construction.

The latter surplus would be channeled to repairing some 200 reservoirs and dams affected by the earthquake. In addition, the Ministry also proposed that the quake-hit Sichuan province be exempted from or given discounts for its share of contributions towards the Three Gorges construction fund, and the reservoir post-migration rehabilitation program fund.

As for the funds for rural market aid, money would be drawn from it to support the recovery of rural shops, wholesale agriculture markets and distribution networks to ensure commodity supply chains in quake areas returned to normalcy as soon as possible, the brief reported. It added the funds available for this purpose would be over one billion yuan.

According to the brief, the Ministry was finalizing ways to adjust expenditures and relocate funds from various sources in order to channel aids to central enterprises in a timely fashion.