BEIJING, April 17 -- China needs laws that guarantee private property rights to attract enough international investment to control unemployment and to help Chinese companies withstand foreign competition, the central bank said.

    The government should speed up passage of antitrust legislation, reduce its holdings in domestic companies, and stop interfering in sales to private investors, said People's Bank of China Vice Governor Wu Xiaoling in a speech at a mergers and acquisition conference organized by the government in Beijing.

    "The uncertainty of private property rights increases risks," said Kenneth Davies, senior economist at the Organization for Economic Cooperation and Development's directorate for financial and enterprise affairs.

    China wants corporate mergers to help accelerate the reform of domestic companies as the government lowers restrictions to foreign competition, in accordance with pledges made to join the World Trade Organization. Such investment may offer an alternative to the closure of inefficient, State-owned firms, which risks increasing the country's jobless rate.

    A lack of legal clarity on the ownership of assets in China makes it difficult to know what acquisitions are legal and to estimate tax liabilities, Davies said in an interview at the conference.

    "We need the legislative framework to give a clear interpretation of private property rights," Wu said. "We don't have a very good environment for mergers and acquisitions."

    Legal uncertainty keeps too many institutional investors out of China's merger and acquisition market, leaving it too reliant on domestic commercial banks to provide the financing, Wu said.

    "Our merger and acquisition market basically depends on the banks instead of the capital market, and they shouldn't take on this risk," Wu said.

    (Source: Shenzhen Daily/Agencies)