| China asks for share of SOE dividend cake |
SHANGHAI, May 31 -- China's State Council will start making budget plans for all state-owned assets this year and will require state-owned companies to pay dividends to the government.
The decision was confirmed at a council meeting yesterday chaired by Prime Minister Wen Jiabao, China News Agency reported today.
The budget plans are expected to start trials first at companies owned by central-government-level departments, the report said. Other state-owned corporations will also start to pay dividends according to local governments' schedules.
The budget plans, which ended a 13-year-long "tax only" policy for state-owned companies, justified the government's right to receive dividends as shareholders in state-owned companies, the report said.
The budget plans, covering incomes and outlay costs of all state assets, will also allow the government to sell some unimportant state-owned companies to optimize the resource allocations, the report said.
The budget plans will be made separately from the government's plans for public affairs, the report said, citing contents at the meeting. Proportions of the dividends that should be turned over to the government will be defined appropriately according to the company's business situation and the need of macro economy management.
The dividends will be used to fund public works projects and support the development of select industries, said Li Rongrong, director of the State-owned Assets Supervision and Administration Commission last year.
Most state-owned companies were not required to pay dividends to the government since 1994 as they bought their fixed assets on bank loans rather than infusions from the government. Another reason was that some companies shared part of government departments'
However, the World Bank has argued in previous reports that Chinese state-owned firms, with no need for dividend payouts, usually reinvested their profits inefficiently, leading to greater risks of inflation.
In 2006, state-owned enterprises across the country made profits of more than 1.1 trillion yuan (US$150 billion) while companies under the direct control of the central government took a slice of 770 billion yuan, according to a research institution under the Ministry of Finance, the report said.
The institution also estimated that profits from state-owned companies will exceed 1.2 trillion yuan this year.
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