On Monday as part of an ongoing drive to improve the efficiency with which state funds are used, China published a list of seven sectors critical to the national economy and in which public ownership is considered essential.

The sectors are armaments, electrical power and distribution, oil and chemicals, telecommunications, coal, aviation and shipping, according to 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 Li Rongrong, minister in charge of SASAC. "The Chinese government will inject more capital into large state-owned enterprises (SOEs) in these priority sectors, optimize their structure and make them more competitive," said Li.

More than 40 of the 161 large SOEs supervised by the SASAC are engaged in these sectors. Their total assets account for three quarters of all central SOEs and they rake in 79 percent of the profits.

"In electrical power and distribution, oil and chemicals, telecommunication and armaments central SOEs should either be solely owned by the state or else the state should have a majority shareholding," said Li.

"In the coal, aviation and shipping industries the state must always have a controlling stake in central SOEs," he said. "Central SOEs engaged in the downstream oil and chemical sector and in value-added telecom services can continue to bring in private or foreign capital to boost vitality," added Li.

To reorient state capital away from non-critical areas to priority sectors the SASAC say China would reduce the number of central SOEs by at least one third to between 80 and 100 before 2010 through mergers.

Social security and re-employment issues would be properly addressed when non-performing SOEs were closed, the SASAC promised. "China aims to build between 30 and 50 large, internationally competitive companies by 2010," Li said.

According to statistics released at a press conference Tuesday, profits of China's 161 SOEs reached 688.77 billion yuan in the first 11 months of the year. This is up 18.9 percent over the same period last year. The total profit of central SOEs is expected to reach 720 billion yuan (US$92.3 billion) in 2006.

(Xinhua News Agency December 19, 2006)