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CONFIDENTIAL #2
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capital spending and to keep overall capital investment better in line with the pace of economic growth. According to the latest statistics, non-budgetted capital investment by state-owned enterprises still amounted to about Rmb 10 billion in 1986. At a total of Rmb 193.8 billion in 1986, fixed capital investment by these enterprises was 15.3% higher in money terms than a year ago, representing a considerable deceleration from the increase of 41.8% recorded in 1985. Another healthy sign is that the share of investment going to the bottleneck areas has increased. In the energy sector, for instance, the rate of increase in fixed capital investment was 22.2% in 1986, significantly higher than the overall rate of 16.7%.
15.
In 1986, progress was made in reforms of the industrial management system with the promotion of horizontal integration, the passing of the trial bankruptcy law (its implementation has to await the enactment of another law on state-owned enterprises), and the hiving off of loss-making state or collective enterprises to individuals or other collectives. Attempts have also been made to introduce a factory manager responsibility system to replace the old system under which the secretary of the factory's unit of the Chinese Communist Party had the greatest say in management decisions. According to a set of regulations promulgated on 11 January 1987, the factory manager is the sole director and legal representative of an enterprise. As such, he carries full responsibility for production and for the management and administration of the enterprise. He may be appointed, elected or recruited through advertisement, with a normal tenure of three to five years. The authority of the factory manager is, however, constrained by the workers' congress, which has the right
CONFIDENTIAL & B