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Forcefully Promote Enterprise Reforms and Actively Implement Reemployment Projects
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366 46 Forcefully Promote Enterprise Reforms and Actively Implement Reemployment Projects1 january 8, 1997 it is inevitable that we will encounter some difficulties in the course of reforming Soes. the current difficulties are primarily manifested in the lower profits at Soes as a whole, in the considerable number of loss-making Soes, and in the inability of some to even pay wages. this is a latent factor for social instability and demands close attention. We must both recognize the seriousness of these difficulties and yet not overexaggerate them—we should analyze the reasons behind these difficulties by seeking truth from facts. there are indeed some objective reasons for the decline in Soe profits. At the very least, the following factors have diverted profits from them: —Price increases for raw materials and energy. cotton prices, for example, have been adjusted upward twice, and so have prices for some other agricultural products, which have increased costs for industrial enterprises. At the same time, the prices of electricity and transportation have been adjusted upward, but the prices for industrial products can’t be raised correspondingly, so some industrial profits have been diverted away. — Changes brought about by reforms in the accounting system, which now uses new methods of calculation. After the accounting reforms, industrial depreciation increased significantly, thereby adding to costs and reducing profits. in the past, projects could not count repayments of principal and interest as part of 1. on january 6–8, 1997, the State council convened a national conference in Beijing on the reemployment of employees of state-owned enterprises. Participants included the directors of the economic and trade commissions of all provinces, autonomous regions, and centrally administered municipalities; the presidents of the branches of the People’s Bank of china; the heads of bureaus of labor, commerce, and foreign trade; the responsible vice mayors from the “optimizing capital Structure” pilot program cities; and responsible members of the departments concerned of the Party central committee and State council. the presiding judges of higher People’s courts from around the country were also invited to the conference. this is the main part of zhu rongji’s speech at the conference. it was previously published in Volume 2 of A Selection of Major Articles since the 14th National Party Congress, and some portions have been omitted in this edition. Forcefully Promote Enterprise Reforms and Actively Implement Reemployment Projects 367 their costs but now they’re allowed to do so, and this also reduces their profits for this period. these are all good things that have correspondingly strengthened the capacities of enterprises to remake themselves, but they reduce their book profits. —The adjustment in [income] allocation relationships. the allocation of national income is excessively tilted toward employees, and wages rose very rapidly during the period of the eighth Five-Year Plan. Because of price increases, wages had to be raised correspondingly, of course, but they really grew too much, and this also reduced enterprise profits. — The continuing demand for all sorts of mandatory contributions from enterprises despite repeated prohibitions. in cases where there are many demands, there may be several hundred types, and at a minimum several dozen types. Some contributions are used for urban construction, but they correspondingly reduce enterprise profits. in talking about these, i am absolutely not saying that the problems with Soes themselves aren’t serious, but that we must see there are objective reasons for them. “What you lose in the east, you recoup in the West.” We have already adopted a series of measures to address these problems. Banks lowered interest rates twice in 1996, and if you add up the interest from these two reductions , the burden on Soes has been reduced by about rMB 100 billion. this also amounts to state support for Soes. in these two rate reductions, we ran a very great risk—for example, some bank deposits might have been pulled out and used to invest in the stock markets. however, although bank deposits were diverted, Soes were able to raise some money by issuing stock in the stock markets , where they gained rMB 60 billion of capital. At present, the central and local fiscal authorities are unable to produce money for their capital, while the enterprises haven’t accumulated much capital of their own, so turning to the stock markets is an effective method of raising some of their capital. Furthermore, 1996 was the year in which most export taxes were rebated. Fiscal authorities budgeted rMB 65 billion for this and...