The 'blind rush' by the country's large state-owned enterprises (SOEs) to be listed on international markets has led to a huge loss of state assets and is jeopardizing the mainland's economic stability, an expert has warned.
In yesterday's panel discussion of lawmakers from Beijing on the sidelines of the ongoing Fourth Plenary Session of the 10th National People's Congress (NPC), Ji Baocheng, president of the Renmin University of China and a top economist, said that he had hoped that Premier Wen Jiabao's government work report would include a warning to regulate or curb the trend.
He estimated that at least US$60 billion worth of state-owned assets were lost on international markets from 1993 to 2005.
"The sum is appalling," Ji said. He said his estimate was based on the price gap between the domestic and international Initial Public Offering (IPO). "An enterprise's international IPO is often 20 percent lower than its domestic one," he commented.
By the end of 2005 more than 310 overseas-listed enterprises had a total market value of US$370 billion -- more than twice that of those listed domestically, Ji added. He estimated about 100 more are expected to be listed on international markets in the next three years.
"What adds insult to injury is that 80 percent of these internationally-listed SOEs are leaders in their own areas of expertise, have high-quality assets and can create a monopoly for themselves in a certain field," said Ji. "Their low IPOs are causing huge state-owned asset losses," he observed.
Ji said that to be listed on international markets these SOEs shrugged off their burden of liability through capital regrouping and ridding themselves of poor assets. "The foreign capitals can then share the high-quality assets and the benefits we achieved through monopolization," he said.
Ji urged the central government to curb the 'blind rush' of SOEs to the international marketplace. "Too much internationalization of our stock ownership will pose a danger to China's economic security and exert a negative influence on our future development strategies," he said.
He suggested that a system should be set up to carefully screen the SOEs that intend to be listed on overseas markets.
(China Daily March 8, 2006)