China to beat illegal MBO by enacting law
(Xinhua)
Updated: 2005-06-27 16:28

China is expected to clarify the legal responsibility of those who make State assets lost through management buyouts (MBO) in small and medium-sized State-owned enterprises at low prices.

The Property Rights Law draft under consideration by China's top legislature says that administrative staff in small and medium-sized State-owned enterprises must bear the civil, administrative or even criminal liabilities if they transfer the ownership of the public property by buying stocks or selling companies at low prices, which lead to the public assets loss.

The law aims to protect the State-owned assets, which are the economic pillar in China, according to an official with the national People's Congress (NPC) Standing Committee.

In small and medium-sized State-owned enterprises, MBO reforms allowed but strictly regulated by the a draft regulation issued in April this year.

While MBO has been increasingly used to make State-owned companies into private ones in recent years, managers were often found cheating or engaged in malpractice damaging the interests of employees, investors and financial institutions but bringing themselves private gains.

According to official statistic, China losses 40 billion yuan ( 4.8 billion US dollars) of State-owned assets annually. There are tens of trillions yuan of State-owned assets under the supervision of governments at all levels in the country.

The loss of the State-owned assets has triggered dissatisfaction and condemnation across the country, as many companies' employees appealed to the governments for intervention.

"Standardizing the MBO by enacting a law is significant as it's a stride forward in the property rights reform of China's State-owned companies," said Li Shuguang, professor of China University Of Political Science and Law.