Cover, issue no. 374 June 30 2008
Translated by English edition staff
Original article: [Chinese]

Many controversial issues were omitted. Its jurisdiction was reduced to "operational state-owned assets". Sensitive issues were only briefly mentioned. In addition, its name was changed to Law of State-owned Assets of Enterprises.

Despite over 15 years have been invested in its drafting, the State-owned Assets Law, now in its second incarnation, has yet to become any clearer.

During the drafting process, China's economic system has transformed from a planned economy to a market-oriented one. Even the drafting committee changed several times.

At present, state-owned assets reform has entered a key phase. Strategic adjustment of the state-own economy has yet to end, and we are talking about tens of trillions of yuan worth of assets, which need clear definition and positioning granted by law.

Judging from the current debate, most of the difficulties in drafting the law rest in battles between interests. Such battling between various bureaucracies, as well as certain personalities, can influence the progress of drafting or change the original intention of lawmakers.

During the drafting, the bureaucracies involved each stuck to their own views on who should represent the state to claim right over certain category of state-owned assets; each also stubbornly defended their stands over which state-owned assets should be excluded from the jurisdiction of the law. The fundamental reason for this battling was that all hoped to maximize power and minimize supervision from the top.

This is understandable given the twists and turns in the past 15 years, whereby neither a "broad" state-owned assets law - which covers all national assets - nor a "limited" one that regulates only operational public assets came into being.

This has also led to the dubious identity of the State Council's State-owned Assets Supervision and Administration Commission (SASAC). Its status as the sponsor and supervisor of state-owned assets is undermined, as its control is only extended to some 150 central government controlled firms, a small fraction of the national treasures.

The right to rule over other state-owned assets in many industries such as finance, tobacco, railway, and natural resources in fact belongs to various other institutions or ministries.

Even if the law was able to solve competing interests or dissolve the stickiest issues by leaving them aside, were we able to gain a desired National Assets Law?

After the second round of review, the draft law in concern appears to be meant for defending rights and interests of the assets, securing the assets and finding ways to enhance value appreciation. In our view, to fulfil and promote these purposes, a State-owned Enterprises Law would be suffice, yet a National Assets Law covers wider scope.

Since the setting up of SASAC, Chinese state-owned enterprises have moved from company restructuring reform to asset management reform. The differences between these two reforms concerned a shift in focus, whereby the survival of individual enterprises is no longer the core of the issue, but means to effectively deploy state assets to maximize socio-economic development and public interests take the centre stage.

The essential way to achieve that would be reforming and re-allocating existing state assets. In the process, it would involve making choices based on national interests, and ultimately that would involve gives and takes, gains and losses. Thus, value maintenance and appreciation or the prevention of state asset losses would only be part of this process, but not the ultimate goals.

At the end of the day, state-owned assets are actually property of the people, who entrusted the government for safe keeping. As such, it is important to enact law that clearly stipulates the government's role, responsibilities, and manners in handling the assets.

We hold that the state-owned assets law should first define the respective responsibilities of the government, the assets sponsor, and the enterprises involved. Thus, separating the government functions from assets operations, and let businesses be market oriented and competitve.

A forward looking state-owned assets reform should not just narrowly define the present draft law as a decree meant for securing the state-owned assets. It should be about how the assets could be managed to maximize social welfare and public interests.

Meanwhile, we think that the Company Law and Securities Law have made clear regulations on transaction procedures and some technical operational issues, thus, need not be repeated or stated in details in the state-owned assets law anymore.