Your markets are shifting away toward better, more efficient, more reliable and environment-friendly competition. Your sales chart looks like the earth's gravitational pull is particularly strong under your foot.

Your stock is worth about as much as junk. Your banks are turning off the spigots, effectively closing the last access to financing your needs to upgrade your production lines and technology. In fact, the bank collection officers are a daily presence in your conference room. Your suppliers are parking themselves in the other room demanding payment two years overdue.

Your work force is aging fast, their skills are falling so much behind they would need six months of training to operate even obsolete equipment phased out by world-class companies. And you can't afford the training costs, not to mention the purchase of those machines.

You are eight years in arrears in paying for your employee pension funds. There is no hope of ever making up for the shortfall the way your sales revenue keeps dwindling. Your chief financial officer's daily job is kowtowing all around to scrounge up some "sympathy" loans for the current payroll.

You are forbidden to lay off excess workers.

You are not allowed to file for bankruptcy. Not only because you can't afford the severance pay, but because the government won't allow you to go to court either.

So you watch in horror as the deferred payment of salary and bank interest pile higher and higher. You are disappointed time and again as prospective investors and acquirers turn away, repulsed by the bottomless hole you are in.

Any ideas? Anyone in his right mind would as soon turn back to his game of Monopoly. Unfortunately it is not a bad joke, but a living nightmare haunting the Beijing government, an epidemic affecting most of the state-owned enterprises, or SOEs, in China. There are still some 300,000 of them, some with a work force as large as 1 million workers, providing goods and services so critical to the economy that they can't be shut down.

Take Heilongjiang province. Among the province's 5,926 SOEs, combined assets are recorded at 42.1 billion yuan, or US$5.1 billion, but collective debt and realized losses are more than twice that at 85.6 billion yuan. That means, that for the billions worth of investments the state poured into the province, the government bought over 40 billion yuan of debt. The government owes that much to banks in that province alone. And bad loans in banks translate into a corresponding loss to the ultimate creditor: the millions of retail investors who entrusted their retirement money to the banks.

This is the dilemma facing the average manager of a state-owned enterprise. The common saying in China is that the Communists used their bodies when running businesses: They tapped their foreheads when making multimillion-dollar investment decisions, pounded their chests when extolling the bright prospects of the project and wiped their behinds as they rose to leave for another fat cat assignment after the millions of dollars flushed down the toilet.

The government is finding itself between a socialist rock and a capitalist hard place. Ideology and practical considerations - the need for social stability - require the state to keep the SOEs afloat at all costs. But the harder the state tries to save the sinking SOEs, the more losses they will ring up because inefficiency and corruption combined with mismanagement and lack of accountability are continuing. The SOEs are beyond saving. There is simply no good money any more to be thrown after the bad.

But officials keep trying. In a recent analysis, Thayer Watkins, an economist with San Jose State University in California, outlined the example of a Sichuan province cement manufacturer that was turned into a corporation named Golden Summit in 1988 and listed on the Shanghai Stock Exchange in 1993. Private investors own about 4 percent of the stock, Watkins writes. The board of directors consists entirely of government and party officials. When another SOE, Dadu River Steel, couldn't pay its workers, the local government simply forced Golden Summit to take over Dadu and its obligations. Golden Summit was ultimately required to take on liabilities of other cement-making SOEs far from Sichuan. This has been repeated all over China. Thus, even a nominally privatized and listed SOE, whose shareholders logically could have expected some rational investment decisions, was saddled with burdens that debilitated the company, according to Watkins.

So what to do? That is the question haunting a government that is now forced to shed its socialist mantra and try capitalism. They have learned the hard way that privatization is the last remedy for the dying patients that are SOEs. It is recognized and accepted, too, albeit reluctantly, that no endeavor has a chance of success unless accountability, guaranteed by self interest, is in place.

That is basically the message, buried in an overgrowth of Partyspeak, from the just-concluded Third Plenary Session of the Communist Party. Outside Beijing, local officials are more direct, openly courting capitalists: "We want to attract Fortune 500 companies to invest here," they will broadcast again and again.

Along with the influx of investment and acquisition dollars, the capitalists are expected to bring all the corollary in-house regulations and management expertise. But is that enough? The question remains: will capitalism succeed where socialism failed? Or will commercialism work in a communism-ravaged country?

It is exceedingly difficult. Before overseas investors expect to succeed, they may do well to pay heed to a few survival tips first:

Insist on total control. Joint ventures may be fine in a monopoly sector, as they open the door a crack. But otherwise they are counter-productive. What can local partners bring to the table? If the local partner had been so good, how did he land on a street corner asking for help? A minority stake with no or little say at the finance and treasury departments is as good as throwing more money away.

An object lesson: many of China's publicly listed companies are now facing deep financial ruin precisely because the money they raised was misappropriated and lost in much the same way the SOEs wasted government funds. You just can't trust them to treat your money differently if they have their way. In fact, more and more foreign firms are ditching their Chinese partners.

Choose a place where there is respect for the rule of law. Yes, there is a big disparity in how the laws of the land are upheld between different areas. Local municipalities have a proclivity for selective enforcement. This is very important. Just because you are used to doing business within a legal framework does not mean that your counter parties in a transaction will be as honorable. Collection of accounts receivable is notoriously difficult, if not impossible. The chain of debt, where A owes x to B, who owes y to C, who in turn owes z back to A is mind-boggling even to the prime minister. Despite the foot-thick rules governing your internal risk management, ultimately it falls on the local courts to bring justice, or not.

Make it clear to the government that you won't pay for their mistakes. While government has proven that it is incompetent to look after workers, it is also adamant that you can't lay off workers. Rather, you will be asked to hire more, preferably the half of the unemployed in the city, so that their headache will become yours.

Not surprisingly, it is often the retirees who picket the bankrupt factories, keeping away any new investors. They fear once the government washes its hands of them and the capitalists begin to "restructure" the SOE, they will be the ones holding the empty bag, having no one and nothing to fall back on. There is only one way, and one way only, to make decent and just arrangements for the older generation of workers near and at retirement age: Liquidate all party/state assets into a compensation fund.

Cheap labor and natural resources, lax environmental controls and a phantom huge market have not helped socialism. Capitalism will meet with the same failure, unless the companies eager to enter China avoid those pitfalls.