China’s banks and other top state companies will be required to hand over more profit to the government, a Cabinet official said yesterday, as Beijing shifts resources to encourage consumer spending and small businesses.
The change is part of reforms intended to reduce China’s reliance on exports and investment by boosting domestic consumption.
The privileged status of state companies, which currently pay 10 to 15 percent of profits to the treasury, has also fueled public complaints that they and their well-paid managers are failing to share their windfall from China’s boom.
“The tendency for the future is an upward trend” in payments to the government, said Shao Ning (邵寧), deputy chairman of the Cabinet’s State-owned Assets Supervision and Administration Commission (SASAC), at a news conference.
The panel oversees 121 of China’s biggest companies, including oil giant PetroChina Ltd (中石油), Bank of China Ltd (中國銀行) and China Mobile Ltd (中國移動通信).
Shao gave no payment target but said the “ideal ratio” would be equal to the percentage of profits that publicly traded Chinese companies pay out to shareholders.
Top state companies have benefited from subsidies and other favors as Beijing tries to build up “national champions” in banking, steelmaking, oil and other industries.
However, the Chinese Communist Party’s (CCP) latest five-year economic plan calls for the build up of domestic consumption and service industries, which will require shifting resources from state industry to households and entrepreneurs.
SASAC companies earned 1.14 trillion yuan (US$180 billion) last year and turned over 60 billion yuan to the government, according to Shao. He said that was nearly double the 31.5 billion yuan paid in 2009.
Shao defended allowing enterprises to keep the bulk of their profit, saying it was spent on needed assets. He added that it was “impossible for people inside the companies to divide the profits” among themselves.
Public complaints prompted Beijing to order the executives of banks and other financial firms to take a pay cut in 2009 after the global crisis battered their profits. Managers of state companies, who are appointed by the CCP, are paid the equivalent of hundreds of thousands of US dollars a year — modest by Western standards but many times the income of an average Chinese family.
Companies supervised by SASAC also include enterprises in nuclear power, coal, shipbuilding, tobacco, steel and petrochemicals. Several are among the biggest companies in their global fields based on their dominance in their protected home market.
Shao said state companies still need to be made more efficient and competitive.
“We need to promote the reform of these companies so their internal mechanisms become more market-oriented,” he said. “The reform of state-owned enterprises is far from being over and there are still tasks that need to be completed.”
Citing Ministry of Finance figures, the Global Times newspaper said yesterday, that the state industries payout to the government was lower than that cited by Shao — 44 billion yuan, or 2 percent of almost 2 trillion yuan in total profits.
The Global Times said that its figures were based on 120 companies, but did not make clear whether that was the same group cited by Shao.