BEIJING - CHINESE legislators have passed a law aiming to prevent state-owned assets from being sold too cheaply or embezzled by officials, state media reported.

The law, passed on late Tuesday, bans managers of state companies or their relatives from using their position to secure excessively large shares of the enterprises for themselves, the Xinhua news agency said.

'The law was made to close legal loopholes and better protect state-owned assets,' said legislator An Jian, according to the report.

He said some state-owned assets were embezzled after being converted into cheap stocks, sold at low prices or even obtained free.

'Such conducts caused the loss of state-owned assets and triggered strong public complaint and concern,' Mr An said.

Officials caught embezzling, trading power for money, transferring assets at unreasonably low prices or causing economic loss to the government will be punished, according to the law, which goes into effect on May 1, 2009.

The law also details procedures for the restructuring of state assets, including accurate audits before firms are merged or sold, a move addressing concerns that valuable assets were sold too cheaply, especially to foreigners.

'The transfer of state assets to foreign investors should not endanger national security and public interests,' the law says.

China has nearly 115,000 enterprises that are either wholly state-owned or with the state as the biggest shareholder, Xinhua said.

The total monthly profit of the 147 enterprises directly controlled by the central government typically ranges from 80 billion yuan (S$17.53 billion) to 100 billion yuan, it added. -- AFP