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6.
(3),
Apart from cooling down the overheated economy, two other economic policies have received close attention recently. One of them is concerned with the strengthening of economic management. With a view to driving out
inefficiency, local regulations have been issued in industrial cities including Shenyang, Wuhan and Chongqing to make provisions for unprofitable collective enterprises
to go bankrupt
The bankruptcy legislation, which is
to be applied nationwide, is now in the drafting stage.
The provisions for bankruptcy represent a bold move in
China because bankruptcy has up to now been regarded as a
feature uniquely associated with capitalism. The first enterprise that went bankrupt under this policy was the
Shenyang Explosion - Proof Equipment Factory. The
managerial personnel of the factory were penalized.
Undoubtedly, the smashing of the 'iron rice bowl' concept will force an enterprise to improve its management and to
pay more attention to its long term interests. However,
in the absence of a rational price structure in China and in view of the fact that most Chinese enterprises possess only limited autonomy in making production decisions, profits and losses may not accurately reflect the level of
efficiency of an enterprise.
(3) As an illustration, the regulations laid down by the
Shenyang authorities stipulate that an enterprise can go under if accumulated losses exceed 80% of its fixed assets.
G.F. 326
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