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Assets sale needs caution
2003-08-13
China Daily
The pros and cons of selling State-owned assets to foreign companies should be weighed up carefully before allowing such purchases, said an article in China Business Times.
According to reports, the Beijing municipal government has decided to put State-owned assets valued at 25.2 billion yuan (US$3.04 billion) up for sale. The assets, which held by 104 State-owned enterprises, could be sold to foreign or domestic private investors.
Though not the first such sale in China, the capital city's move still has far-reaching implications for the disposal of State assets in other provinces and cities, said the article.
Even though both domestic and foreign firms can bid for the assets, people cannot help but worry that multinationals will be favoured as potential buyers, like they were in previous sales in Shanghai and Shenzhen.
And they have grounds for concern, given the obvious advantages of selling to multinational companies.
Foreign companies usually offer higher prices than domestic ones.
And inflow of foreign capital is often on the top of the government agenda for development. Selling State assets to multinational companies could help the officials achieve their targets.
Moreover, most multinationals have advanced global marketing and distribution channels, facilitating exports by domestic manufacturers.
However, selling State assets to multinational corporations also has its downsides, the article said.
After the acquisition, jobs may be cut during restructuring, local brands may be endangered, and medium- and small-sized enterprises may be threatened.
When multinationals control enterprises, they can also take advantage of their branches in different countries to evade tax.
Officials should not just focus on foreign investment but bear in mind that medium- and small-sized enterprises are the major source of job opportunities in the long run. Monopolies formed after the entry of multinational giants could jeopardize the competitiveness of those medium- and small-sized firms.
Therefore, a long-term perspective should be taken when making decisions regarding the disposal of State assets, the article said.
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