State-owned Assets Supervision and Administration Commission of the State Council, Confirmation of Results of State-owned Capital Value Preservation and Appreciation in Enterprises Tentative Procedures

Issued: August 25 2004
Effective: August 30 2004
Applicability: The Procedures apply to the work to confirm results of state-owned capital value preservation and appreciation in enterprises in which the State Council, people's governments of provinces, autonomous regions and municipalities directly under the central governProceduresment, as well as people's governments of city (with districts) and prefecture level exercise the duties of capital contributors (Article 2).
"State-owned capital in enterprises" is defined as all forms of state investments in enterprises and the equity interest formed therefrom, as well as other equity interest deemed to be owned by the state according to law. For wholly state-owned enterprises, their state-owned capital refers to owners' equity of the enterprise and other equity interest deemed to be owned by the state according to law. For enterprises in which the state has controlling or minority interest, state-owned capital refers to the shares of owners' equity entitled to the state (Article 3).
"Confirming results of state-owned capital value preservation and appreciation" is defined as the verification and confirmation conducted by the state assets supervision and administration authorities of the results of state-owned capital value preservation and appreciation in enterprises according to the audited final annual financial reports of the enterprises and on the basis of comprehensively analyzing and judging the variables that affect the appreciation or depreciation in state-owned capital during the operating period (Article 4).
In case of a conflict between the Procedures and rules and regulations concerning confirmation of results of state-owned capital value preservation and appreciation in enterprises prior to the implementation of the Procedures, the Procedures shall prevail (Article 36).

Main contents: The Procedures list objective factors that cause the appreciation of state-owned capital in enterprises, including: direct or additional investments by the state or state-owned work units, inward transfer without consideration, asset valuation, asset and capital verification, property rights demarcation, capital (stock) premium, tax refunding, accounting adjustment and transfer back of reserve against value depreciation, and factors causing the appreciation of state-owned capital in enterprises recognized by the state-owned assets supervision and administration authorities, such as acceptance of donations and debt-to-equity swap, etc. (Article 12). Article 13 lists the objective factors that cause the depreciation of state-owned capital in enterprises, including: special write-offs approved, outward transfer without consideration, asset valuation, property rights demarcation, digestion of latent losses and on-accounts from previous years, natural disasters and other force majeure situations, handing over of dividends as required, capital (stock) discount, and factors causing the depreciation of state-owned capital in enterprises recognized by the state-owned assets supervision and administration authorities (Article 13). The state-owned assets supervision and administration authorities will rate the rank of enterprises in their respective industries according to the five grades of being "excellent, good, moderate, relatively low and relatively poor".
Related legislation: Supervision and Administration of Enterprise State-owned Assets Tentative Regulations, May 27 2003, CLP 2003 No.6 p36