BEIJING (REUTERS) - Hospitals and schools run by China's government-owned firms will be revamped, closed or transferred to local authorities by the end of next year, regulators said late on Friday (Aug 25), as part of efforts to reform the country's state sector.

The State-Owned Assets Supervision and Administration Commission (Sasac) said in a notice that hospitals and schools operated by state-owned enterprises (SOEs) should be transferred to local authorities by the end of 2018.

Stripping SOEs of the services would help "lighten the social burden of SOEs" as well as increase efficiency of China's education and medical services, Sasac said.

Normal schools from pre-school to universities should be transfered to local authorities to run them, and schools facing difficulties should be merged, the notice said.

Vocational schools could still be run by SOEs and the establishment of an education group to organise the management of these schools would be encouraged.

Hospitals should also be transferred to local governments unless they are uncompetitive, in which case they should be closed; any hospitals continued to be run by SOEs should be operated as non-profits, Sasac said.

The country's heavily indebted state-owned firms, most of which have been carved out of state bureaus, have been under pressure to ditch schools, hospitals, retirement homes, firefighting services and other "social functions" to cut costs and focus on their core businesses.

China's state firms have traditionally been obliged to provide lifelong employment and cradle-to-grave social welfare as part of the "iron rice bowl" system.

But with thousands of companies tottering on the brink of bankruptcy in the 1990s, the government embarked on reforms to reduce their burden.

Reform of SOEs to reduce inefficiencies and create a competitive state sector remains a central part of the current administration's efforts to upgrade and rebalance China's economy.

But progress has been hindered by concerns that trimming operations of SOEs will upset thousands of workers, who expect their positions to give them access to healthcare, pensions and schooling for their families for life.