China Tightens Control Over Critical State Industries

Power generation, oil and shipping among protected industries.

China has listed seven industries as critical to the nation's economic security in which the state must retain "absolute control" and limit foreign participation, state press reported Dec. 19. Military equipment, power generation and grids, oil, telecoms, coal, civil aviation and shipping, have been deemed "strategically important sectors," the China Daily said, quoting Li Rong, chief of the State Assets Supervision and Administration Commission (SASAC).

"State capital must play a leading role in these sectors, which are the vital arteries of the national economy and essential to national security," said Rong. "In these sectors, state-owned assets should expand in volume and optimize in structure, and some key enterprises should grow into leading world businesses."

The newspaper said it was the first time authorities had detailed such a specific list although China has long maintained a firm grip on investment and foreign participation in these sectors.

The announcement also came amid recent fierce debate in Beijing over the future thrust of China's economic reform, with some officials worried that the nation and its firms are losing out to stiff competition from multinationals.

The State Council, or cabinet, has announced restrictions on overseas capital that apply only to enterprises that fall under the commission's authority and do not the include financial, railway and postal sectors.

The report did not provide further details on how Beijing aims to enforce these restrictions although Li was due to address the State Council's information office on the reform of state-owned enterprises. The commission, set up three years ago to ensure state companies remain competitive, plans to restructure between 80 and 100 government companies, and develop 30 to 50 major firms as global competitors.

Under the its jurisdiction are 161 central government enterprises which recorded turnover in the first half of the year of more than $473 billion, the China Daily said.

Copyright Agence France-Presse, 2006

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