Approval for Proposal to Increase Dividends Paid By SOEs Likely

By Xi Si
Published: 2010-10-29

Economic Observer Online
October 28, 2010
Translated by Ruoji Tang and Zhang Chao
Original Article:
[Chinese]

Our reporter learned from the Ministry of Finance that “Proposals for Improving State Budget and State Capital Management” have been submitted to the State Council. The proposals will likely be approved before the end of this year and will be effective by the beginning of next year.

Proposals include increasing the portion of dividends paid by state-owned enterprises, expanding the test for the budget system for state capital operations, and increasing the number of state-owned enterprises covered by the state budget.

The ministry has decided to increase the dividend ratio paid by state-owned enterprises, but has yet to reach a consensus over the amount. Wen Zongyu, the director of the State-owned Economy Research Institute for Fiscal Science at the Ministry of Finance, proposes a 25 to 35 percent increase from the current 10 percent for monopoly enterprises, and an 8 to 10 percent increase from the current 5 percent for competitive enterprises.

Figures in the approved proposal may vary. Some state-owned enterprises insist that a significant increase in dividend ratio will stifle innovation and research.

In addition, the Ministry of Finance will focus on increasing the number of central ministries and subordinate enterprises covered by the budget.

“When enterprises are added to the coverage, the amount of dividends they actually pay is small. The majority of the enterprises are operating at a loss. But the important thing is standardizing the management of state-owned enterprises and to be fair in collecting dividends,” Wen said.

Several new enterprises have already been incorporated into the submitted project. Regardless of the increase in dividend ratio, the dividend total will rise sharply.

The State Council issued the “Pilot System for State Budget and Capital Management” in September of 2007. During its three-year trial, the project collected 157.22 billion yuan. Most of the proceeds from state-owned enterprises were used on research and innovation, and oversea mergers. Only 1 billion went to the public budget.

In the future, however, more proceeds will be allocated to the public budget for social security expenditure. The amount will vary from year to year, depending on need.

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