In recent years, the loss of state-owned assets in chemical companies has become a recurring issue, often linked to off-exchange transactions. For instance, in March 2003, Chen, the legal representative of a phosphate fertilizer plant in Xiangfan City, established a private company under his own name prior to the enterprise's restructuring. During the process, no official transaction was recorded. Instead, Chen sold state-owned assets at a low price and then resold them to private entities at a higher rate, effectively siphoning off 6.31 million yuan in state-owned assets.
Over-the-counter transactions have proven to be a major cause of such losses, with several common techniques used to misappropriate state property. These include:
First, "ambush tactics," where state assets are hidden or fictitious accounts are created to avoid proper valuation. Second, "airborne methods," which involve inflating costs by falsifying liabilities or expenses to make the company appear less valuable. Third, "kicking the ball" — using influence to undervalue state assets before selling them to selected buyers. Fourth, "karate-style" operations, where individuals exploit their authority to transfer state assets without real investment or shares. Lastly, "blindness tactics," involving deceptive reorganization or fraudulent contracts to secretly convert state assets into private ones.
To address these issues, the General Office of the Hubei Provincial People’s Government recently issued “Several Opinions on Strengthening the Supervision over the Entering Transactions of State-owned Ownership of Enterprises.†This policy mandates that all state-owned enterprises in the province must be supervised by the State-owned Assets Supervision and Administration Commission (SASAC). When transferring state-owned property rights, companies must submit a “property rights transaction certificate†from an authorized trading institution. Additionally, industrial and commercial authorities will require SASAC-issued approval documents and a “State-owned Property Rights Change Registration Form†before processing any changes.
For unauthorized off-exchange transactions, the supervisory body can demand the immediate halt of the deal. If the transaction has already taken place, SASAC may refuse to register the change, and the industry and commerce department will not approve the necessary formalities. Moreover, those responsible for such actions may face disciplinary investigations.
Sunlighting these property rights transactions is essential for protecting state-owned assets and ensuring transparency and accountability in corporate governance. It serves as a critical measure to prevent future losses and promote fair management of public resources.
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