Updated: 2005-12-26 18:29
China's state-owned banks will receive no more government cash bailouts for business losses after they absorb new private investment, the country's top banking inspector told a Chinese-language newspaper.

Liu Mingkang, the director of the China Banking Regulatory Commission, said China's large commercial banks can expect no more state rescue payouts as they recruit outside strategic investors and issue stock.

"After their investment and beneficiary entities have diversified, it will be impossible for state finances to again bury debts from commercial banks' business losses; otherwise, that would fly in the face of principles of fair market competition," he told the 21st Century Business Herald.

But Liu said China's banks should be looking to outside investors for their expertise, not their money.

"The policy design and objectives for attracting strategic investors are directed at attracting expertise, not capital. That means banks shouldn't rush to attract investors to meet capital adequacy targets," he added in an interview with the paper.

Li Rongrong, the chairman of the State-owned Assets Supervision and Administration Commission, said many of China's 169 state enterprises recorded brisk sales growth in 2005.

These state-owned conglomerates include business flagships such as the Baogang Steel Group and the China Petrochemical Corporation.

But Li said too many state-owned conglomerates are doing poorly even as China booms, according to the Xinhua News Agency.

Forty-five of the companies recorded falling profits in the second half of the year, and 80 recorded costs rising faster than sales income, Li said. And many of these companies are turning to loans from state banks, he added.

"Some enterprises are relying on using new loans to pay off old ones in order to maintain daily operations, and a few are facing crisis," Li said.

He called for faster internal reform of these companies.