I. Accelerate the building of the modern enterprise system
In 2000, the large and medium-sized state-owned enterprises has realized the goal to remove deficit though reform in 3 years and initially established the modern enterprise system. In view that the system reform of some enterprises is not standard, the relevant state section paid special attention to the standardization of building modern enterprise system. In 520 key state-owned enterprises, the transformation to stock company has roughly been completed. The system-reformed companies have all set up shareholder's meeting, directorate, board of supervisors, and management personnel. The corporate administrating system of each section performing its own function, coordinating the operation and efficiently restraining has been initially built. Part of the listed companies begin to implement the independent director system and some of the key state-owned companies have made experiments to employ directorate by election and deploy market-oriented management personnel. The enterprises implementing debt-to-equity swap seize this opportunity, deepen the reform and shift to a new management mechanism. 160 such enterprises have registered legally and set up new companies.
II. Increase the dynamics of closing bankruptcy and build enterprises' market-withdrawal mechanism.
To speed up the market-withdrawal of the inferior enterprises and gradually build the mechanism of market-withdrawal of the inferior enterprises are the key content of the state-owned economy's strategic adjustment. Due to the structural contradiction inhibited historically and the rigid long-playing mechanism of the ever-living and constant appearing of state-owned enterprises, a big number of enterprises without the existing and developing conditions has been accumulated in China and need retreat from the market as soon as possible. Since 1996, our country has arranged a certain amount of bank reserves for bad debts to help these enterprises retreat from the market every year. From 1996 to 2000, the State Leading Group approved 5335 enterprise merges and bankruptcies and cancelled after verification RMB 208.64billon bank reserves for bad debts and creditor's debts of assets management companies. In order to consolidate and develop further the achievements of 3 years of deficit-removal and realize that state-owned enterprises can "achieve development if entering the market and keep in order while retreating from the market, since 2001 State Economic and Trade Commission, sticking to the goals of structural adjustment of state-owned economy, has continued to actively give impetus to enterprises' merges and bankruptcies. The merges and bankruptcies in 2001 took the following features:

1. The bankruptcies completed in this year reached 463, the most compared with the past. The bad debts plus the interest-free merges amount to RMB51.5 billon yuan which were the most in past years. 2. A number of important and difficult problems were dealt with. Some disposal suggestions to the bankruptcy and deficit-removal of the non-ferrous metal enterprise and public institutions, whose administration was transferred to the local government by the central government, were brought forward and submitted to State Council for approval. The relevant items were under examination. Based on the scheme approved by the central government, the reorganization and bankruptcy of a subsidiary in Shandong transferred by Chongqing Automobile Group's was carried out smoothly. In 2001, Chongqing Automobile Group basically realized the balance of gain and loss. After repeated research and coordination, the Scheme of reform and Deficit-removal for Enterprises of War industry was submitted to State Department. The Scheme was approved and put into practice in April, 2002(Dispatch No.7 in 2002 by the State Department). State Council and State Commission of Science, Technology and Industry for National Defence jointly held the Reform and Deficit-removal Work Conference for Enterprise of War Industry, which indicated the reform and deficit-removal of enterprises of war industry had entered the implementing phase. 3. The execution was standard and the operation was steady. In order to carry out enterprises' closedown and bankruptcy work smoothly, State Economic and Trade Commission issued the Emergent Circular about Stabilizing Work of the Bankrupt Enterprises which further defined the system of stabilization work responsibility and established and perfected the information network of enterprises' closedown and bankruptcy and the report system of stabilization work. Take coaling industry for instance. At present, 65 enterprises completed closedown and bankruptcy and basically maintained social stability. The situation that every enterprise made trouble when the bankruptcy work was carried out since the work began in 1999 has been changed.

Enterprises' merge and bankruptcy played an important role in facilitating the regional and industrial adjustment of economic structure and consolidating the achievements of reform and deficit-removal in state-owned enterprises. Following the deficit-removal in the industries such as textile industry several years ago, the coaling industry changed the deficit situation in successive years. Book profit increased plus loss decreased amounted to RMB3.4 billion yuan in the key state-owned coaling enterprises put under a lower administrative level, among which RMB2 billon yuan of loss was avoided by closing 65 coal mines. By encouraging the merge and bankruptcy of enterprises, some places adjusted and optimized the economic structure and built the mechanism of survival of the fittest, so the quality and performance of economic operation was greatly improved.

III. Implement the strategy of big company and big enterprise group
Expedite the strategic reorganization of enterprises

Under the leadership of State Council, China National Petroleum Corporation, China Petroleum and Chemical Corporation, Shanghai Baosteel Group Corporation, top 10 military industry group corporations and top 4 big information industry group corporations have been organized since 1998. Since 2001, the State Council has approved the organizing plan for China Aluminum Corporation and organized a new China Aluminum Corporation. Meanwhile, separation of enterprise from administration and group organization of non-transportation enterprises of railway system, civil aviation enterprises, gold enterprises and rare-earth metal enterprises were paid close attention. The blue print has been researched and designed. Among the organized big enterprises and groups, quite a few enterprises realized the reorganization and listing. They not only raised capital and quickened development, but also encouraged mechanism transformation, management improvement, social function separation and repositioning of redundant personnel. Take China Petroleum and Chemical Corporation for example, 480 thousand people continued to work in the stock company and more than 1 million people remained in the successive enterprise. At present, 250 thousand redundant personnel have been repositioned though various channels so the competitiveness is enhanced. In order to fulfill the strategic decision to "pay special attention to the big enterprises" made by Central Committee of the Communist Party and State Department and develop a number of big companies and enterprise group with international competitiveness, State Economic and Trade Commission held experience symposium of the uniting and reorganization of Shanghai Baosteel Group Corporation in May, 2001, where two problem were emphasized: one is to let enterprises become the main players and respect the law of the market and enterprise's will. Government's excessive interference should be avoided. The other is to aim at fostering enterprise's core competitiveness. The chief goal is to strengthen their capacity. Blind expansion should be avoided. In November, 2001, the General Office of State Council transmitted Instructional Opinions about Developing Large Enterprise Group with International competitiveness drafted out by State Economic and Trade Commission and other 7 departments so that the work had formal political basis.

IV. Increase the dynamics of enterprise's technology transformation and enhance technology innovation capacity.
In 2001, government departments and enterprises continuously strengthened the technology transformation in industrial enterprises around variety, quality, benefit and export expansion. By the end of 2001, the state had arranged special fund for treasury bond up to RMB26.5 billon yuan for the discount of the key technology transformation which brought along RMB172.1 billon yuan loans. 1218 technology transformation projects of the key industries and enterprises have been supported and the total investment amounted to RMB281 billon yuan. By the end of this year, 788 projects will start construction and 289 will be completed and put into production. After the completion of all the projects, the symbolic goal of industry upgrading will be initially achieved so that the contradiction that the structure of China's key industries is not sound will be greatly alleviated, the industrial structure optimized further and the development stamina and competitiveness of the key enterprises greatly enhanced. Under the support of a series of political measures, the technology reform of enterprises has been expedited in recent years.
The establishment of the technology innovation system with enterprises as main players has made new progress. In 2001, the related department made follow-up evaluation to the enterprise technology centers authorized by the government and kept dynamic management. In the principle of survival of the fittest and strict management, 27 unqualified enterprise technology centers were closed and 30 were newly cognized. By probing into the mode of development industry base of industry technology and organizing the development of numerical control machine tool and other industry platform technologies, some common and crucial technology problems have been solved. Tsinghua University and other 5 universities have been recognized as the first national technology transfer centers so that the meaning of production, study and research integration has been expanded. Because the research and development of a number of technology facilities and whole-set facilities supporting and outfitting the big projects have bee organized, the technology level of China's large and important technology facility's manufacture has been improved.

V. Enhance the function of board of supervisors sent by the government to key enterprises
According to the decision of the Fourth Session of the Fifteenth Central Committee of the Party, the system of check specials was under transition to the board of supervisors system. Correspondently, State Council promulgated the Provisional Regulations of the State-owned Enterprise's Board of Supervisors and defined the nature and responsibility of board of supervisors. The promulgation of the Regulations indicated the smooth transition from the system of check supervisor to board of supervisors. The modified Corporate Law stipulates the board of supervisors of the exclusively state-owned enterprises is mainly sent out by State Council or the institutions authorized by State Council, therefore, the legal status of the sent-out board of supervisor has been established. 2001 is the transitional year from the system of check specials to board of supervisors. The Board of Supervisors has summarized the successful experience of the work of check specials and made system innovations. Combined with the new situation and requirements, 20-plus work systems have been formulated in succession, which have basically covered various aspects of business operation and team construction. A set of work emphases, procedures and methods different from other supervising departments and with its own features have come into being. Board of Supervisors has been sent out to 174 enterprises directly under the central government and the goal of sending out board of supervisors to enterprises directly under the central government before the end of 2001 has been achieved. The board of supervisors focuses on supervising financial operation and strives to have a comprehensive command of the operation management and the situation of reform and development in enterprises. Four combinations have been fulfilled: combine the supervision of enterprise's financial condition with checking enterprise's abidance by laws and regulations, combine checking the maintenance of asset value of the time with analyzing the historical subjective and objective reasons, combine finding out and revealing problems with tabling proposals for improvement and settlement, combine supervision with evaluation. By following the principle of nonparticipation and noninterference of enterprise's operation and management, the board of supervisors has done its best to conduct thoroughgoing and painstaking work. With great enterprise and sense of responsibility, the board of supervisor has carried out thoroughgoing supervision and examination and objectively and honestly reported the condition of enterprises to the central government and State Council. Up to the end of 2001, the board of supervisors had completed 261 supervision and examination reports.

VI. Give more freedom to the small and medium-sized enterprises (SME).
To take various forms to invigorate SME and let them enjoy more freedom is the main aspect of SOE(state-owned enterprises) reform. Acting earnestly in the spirit of SME reform of the central government, every place has formulated and promulgated a series of policies and regulations to fit the practical situation of the local enterprises and given impetus to SME reform. The SME restructuring has reached 81.4%. Most restructured enterprises has made their ownership relationship clearer, encouraged the transformation of operation mechanism and boosted the enthusiasm of the managers and employees. In order to encourage and support the development of SME and take more steps to solve problems such as SME's difficulty to get loan, State Economic and Trade Commission and other departments have made great efforts to build SME credit rating system and guarantee system and publicized the name list of 100 "honoring contracts and standing by reputation" SME, which aroused great social responses. Various enterprises providing services for small and medium-sized enterprises  nationwide have reached 360 and covered 30 provinces (including autonomous regions and municipality directly under the central government, which can help SME obtain around RMB60 billon loans. The provincial SME credit guarantee institutions have been set up in 18 provinces. The build of SME service system also made new progress. State Economic and Trade commission opened SME credit network and the pilot work of SME service system in Shenzhen, Harbin and other 8 cities. The first law on SME in China, SME Promotion Law is almost completed and under legislative review.

VII. Seriously solve the problem appeared in the reform and development
    Take hold of the right direction of enterprise's reform
1. In view of the problematic tendency that a few places define state assets as collective assets and even as individual assets gratuitously and in disguised form, following the gist of the instructions of the leaders of the central government and State Council, State Economic and Trade Commission has timely done investigation and research to the some practices such as "two replacements in Changsha" and prohibited and corrected some problematic tendencies. According to the requirements of the leaders of the central government and State Council and the related departments' opinions about deepening the reform of SOE distribution system, Instructional Opinions about Share-holding Trials of SDE Managers has been drawn and submitted to State Council.

2. Some operations violating regulations have been investigated and prosecuted and standardized by continuously perfecting policies and measures. In order to strictly enforcing laws, regulations and policies, State Economic and Trade Commission has cleared and checked the enterprise merges and bankruptcies nationwide conducted since 1997 and called for standard operation and stability all over the country. Some operations violating regulation have been investigated and prosecuted, such as the case of bankrupted Zhongjiang County Silk Company of Sichuan Province to shift off debts.

3. To counter of the situation that SOE capital and financial management is not standard, loopholes keep appearing and data lacks fidelity, State Economic and Trade Commission, basing on substantive research and consultation, drew the Instructional Opinions about Informationization Construction of Enterprise Management in April, 2002. With the backing of metallurgy industry association, the key enterprises of metallurgy industry have been chosen as the example enterprises of informationization construction of financial management to encourage the management informationization. In the first half year of 2002, the State Economic and Trade Commission held spot training class of the experience of Star Corporation's management informationization.

Links

The Reform of Industrial Enterprises、　Deepening the Reform on Enterprises