Share SOE profits

As the economic prowess of China's key State-owned enterprises continues to grow, there are increasing calls for them to hand over more of their profits to the State so that people can share the fruits of their success.

Such calls are well-founded as China's SOEs pay only 5 to 20 percent of their profits to the State, depending on how profitable the industry is. Lou Jiwei, minister of finance, admitted that the ratio is "low" during the 2013 China Development Forum on Sunday.

Although State-owned enterprises have been shouldering, at least partially, the costs of corporate reform as China transitions from a planned economy to a market-oriented one, they have only been required to pay dividends to the State since 2007, and the initial ratio was as low as 5 percent.

After years of fast expansion, the financial strength of the SOEs has grown remarkably. In 2007, for example, SOEs profits as a ratio of China's GDP grew to 3.7 percent, up from 1.7 percent in 2001.

The time is ripe for the country to gradually raise the ratio of their dividend payouts to the State, but while the exact ratio of the dividend payout still needs to be decided, we should also reflect on how the already-pooled money has been used.

So far most of the money has been funneled back into the SOEs through the State-owned Assets Supervision and Administration Commission, which takes on the responsibilities as investor on behalf of the central government, in the name of supporting their development.

Raising dividend payouts will therefore be meaningless if the money continues to be earmarked for the well-being of the country's SOEs themselves, not the general public.

Many legislators and policy advisors have argued that such money should be included in the annual government budget - which means its use would be subject to supervision by legislators - so that the general public can all benefit from the continuing growth of State enterprises.

Such an argument is reasonable and arrangements should be made as soon as possible to bring SOEs' dividend payments into the annual budget so they can be used for the benefit of the public.

(China Daily 03/26/2013 page8)