Going cheap: Peking dumps the people's business flops

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Searching for that unique Christmas present for the person who has everything? Look no further. Newly available this week is the first batch of ailing state-owned enterprises in the Chinese capital. Our Peking correspondent went shopping.

At the spick new offices of the Peking Property Rights Transaction Service Centre, the world's biggest privatisation programme is under way. Yan Peijun can tempt you with anything from a soy sauce factory to a manufacturer of ethyl cyanacetate, or a children's clothes production line.

His sales pitch is honest to the point of bluntness: "The enterprises on sale are loss-making and the production conditions are very bad."

Roll up for China's fire sale. Foreign buyers very welcome. The Peking municipality is not so much putting the family silver on offer as running a downmarket car boot sale. In all, 56 not very viable small and medium- sized enterprises have been put up for grabs, part of the brave new world of "Socialism with Chinese characteristics".

Mr Yan, a smartly-dressed 39-year-old, is one of the organisers. He himself has never had the misfortune to work for a state-owned enterprise, and used to help companies register new firms. "My friends joke that I used to help in the birth of businesses; but now I am in charge of the funerals," he says.

Since the 15th Communist Party Congress in September gave the the "downsizing" and sale of many of China's 300,000 state firms the green light, it has become a buyers' market as local governments try to offload all their debt-ridden, decrepit factories. Could Mr Yan point me in the direction of one of the cheaper enterprises on offer in Peking? How about a cloth- shoe factory about 60 miles from the city centre, with a capacity of 133,000 shoes a year, he said. That would probably be available at around the bottom end of the 400,000 yuan to 100 million yuan (pounds 30,000 - pounds 7.7m) price range which he estimated for the 56 enterprises, money that is supposed to cover paying off their debts.

Cloth shoes did not seem to me to be much of a potential boom sector, so would it be all right to buy the enterprise for its 1,580 square metres of land, and close the factory? "Yes," assured Mr Yan, admitting many potential purchasers of these 56 businesses were really only interested in the land and the buildings.

Could I sack all the workers? "That's not necessary," he said. "We've negotiated with the local government owners of all these enterprises that the responsible bureaux will dispose of all the present employees. So if you buy any of these enterprises, there won't be any workers."

If I then wanted to re-hire staff, this could be done according to new contracts, free of the "iron rice bowl" social welfare commitments of Old China.

In the state sector, at least half of the enterprises are loss-making and tens of millions of jobs are at stake.

In the more freewheeling parts of China, privatisation has been going on quietly for the past few years. Shanghai saw some 300 "property rights transfers" in the first half of this year, with a total value of 5.3 billion yuan (pounds 400m).

But the offering is the first such sale in Peking. It was launched last week in the ballroom of a Peking hotel where 170 potential buyers (including just one foreign businessman) had bought pounds 15 tickets to watch the video presentations on the factories, each identified by a code but not at this stage by name. It was a dismal testament to the industrial prowess of Old China. Near-derelict buildings were shown with rows of idle machinery. There were broken windows and disused car parks. Twenty-two of the enterprises on offer were just disused shells; those which are still manufacturing could no longer compete in the market economy.

The 56 factories have been put up for sale by four county governments in the suburbs of Peking. Would-be purchasers who are seriously interested must now cough up 2,000 yuan (pounds 150) for more detailed information, including the exact name and address of the plant and the full financial picture. Site visits will follow. If more than one buyer bids for any site, it will be sold by auction.

The eyes of most of the foreigners, however, have been drawn to Lot 97MA0275. In the English translation of the enterprises on offer, factory 50 miles from Peking is said to be producing "adhesive tapes and dope", though without the pounds 150 information fee, what that factory makes remains a mystery.