They said the role of chief financial officers (CFO) should include that of chief risk officer as growing uncertainties are emerging as the country integrates itself into the world economy.

Vice-Minister of State-owned Assets Supervision and Adminis-tration Commission Wang Yong and Chairman of National Council for Social Security Fund Xiang Huaicheng voiced these urgent views at the weekend's China CFO Roundtable. The meeting was jointly organized by the State asset watchdog and Pan-Pacific Management Institute.

Wang said the role change is even more pressing after the recent China Aviation Oil (Singapore) Corp debacle, which revealed the overseas subsidiary of the State-owned China Aviation Oil Holding Company's thorough lack of risk controls and crisis prevention.

Though only authorized to trade crude oil futures up to a value of US$5 million, or 2 million barrels, the Singapore-listed company transacted trades of 53 million barrels, resulting in losses of about US$550 million, according to an earlier report.

"It indicates that we have a lot to do to avoid further risk among SOEs, and CFOs should play a bigger role," said Wang.

But he said the case cannot slow down the pace of shareholder reforms among Chinese SOEs, some of which are encouraged to earn a greater presence in the global market.

Wang said overseas talent is being welcomed to join in the reforms and the positions of CFO in about 60 major SOEs will open to applicants from home and abroad by the end of 2005.

By then, all the 189 SOEs under Wang's commission are expected to employ CFOs as risk controllers.

Wang urged all CFOs should play professional roles and be honest in reporting financial information.

"Our mid-year assessment in July has found that some enterprises out of 189 SOEs under the commission did not abide by integrity," said Wang.

"We have warned them and ordered them to make corrections," said Wang. He said such enterprises have already been listed as major supervision targets by his commission.

Despite its lagging risk management system, China's big SOEs reported profit hikes of 419 billion yuan (US$50.5 billion) in the first 10 months of 2004, up 53.2 per cent.

Theses enterprises, the flagships of their industries, realized accumulated sales revenues topping 4.47 trillion yuan (US$538 billion) by October of this year, an increase of 29.2 per cent on a year-on-year basis.

Experts said it will never be enough to strengthen risk-prevention capacity for China's SOEs.

Lin Yueqin, a researcher with Chinese Academy of Social Sciences, said sound corporate governance and an effective restraint scheme are essential for a risk-management system.

"The enterprises should have a sound internal auditing and risk management system," Lin said.

(Source: China Daily)