Why China collects earnings from more SOEs?

07:43, November 05, 2010      

Email | Print | Subscribe | Comments | Forum 

China is planning to collect profits from more State-owned enterprises (SOEs) and raise the proportion of profits it collects, the State Council, or the Cabinet, has said.

Beginning in 2011, 1,631 SOEs, up from about 120 previously, will pay part of their post-tax profits to the State coffers, the Cabinet decided at an executive meeting on Wednesday.

"This time the Cabinet has taken a big step forward. That will be a huge sum of money," said a person familiar with the tax change who asked not be named.

The Ministry of Finance did not reveal how much the ratio would be raised.

At present, resource-related companies under the administration of the central government in sectors such as tobacco, oil, petrochemicals, power, telecommunications and coal mining pay 10 percent of their post-tax profits, while the ratio for those in the iron and steel, transportation, electronics and trade sectors should be 5 percent.

Also, financial corporations and companies in sectors like railways, transportation, education, culture, science and technology and agriculture are not included in the profit submission framework.

"The move reflects the central government's determination to protect owners equity as the SOEs are owned by all the people," said Liu Shangxi, deputy dean of the Research Institute for Fiscal Science at the Ministry of Finance.

"Of course, the SOEs' earnings should be submitted and used to improve the public well-being, otherwise they would be seized and used by a small amount of people," Liu added.

The central government collected profits of 14 billion yuan (2 billion U.S. dollars), 44.4 billion yuan and 98.9 billion yuan, respectively, in 2007, 2008 and last year from SOEs. In 2009 alone, however, the enterprises made profits totaling 965.6 billion yuan.

The centrally-administered enterprises have been criticized by the public for having taken advantage of their monopoly or market predominance to make excessive profits. Some of them have even fueled public anger as they used their profits to purchase land at high prices, which is believed to have driven up home prices.

"The ratio of profits that the government collects from resource-related or monopoly enterprises and real estate companies should be raised significantly. But the most crucial matter is how to use the collected money," said Pi Haizhou, a free-lance financial writer, in a commentary.

The money should be distributed among all people to cushion rising inflation, Pi suggested.

"As enterprises are owned by the entire population, centrally-administered companies should make more contributions to the country," said Zhang Chunxiao, a researcher with the State-owned Assets Supervision and Administration Commission of the State Council.

"The government can use the money collected to increase social security funds and promote technical development in energy-saving initiatives and industrial restructuring."

In the Communist Party of China (CPC) Central Committee's Proposal for Formulating the 12th Five-Year Program for China's Economic and Social Development (2011-2015), the ruling party has vowed that the ratio of government expenditure on living standards and social programs would be raised. Social security coverage would be extended and the public service system improved to build positive public expectations.

Meanwhile, the income distribution system would be improved, especially for residents with middle and relatively low salaries, to expand their consumption capacity.

"By raising the proportion of profits it collects, the government will have more room to reform the income distribution system and ease public anger," said Wang Xiaoguang, a research fellow at the Policy Advisory Department at the Chinese Academy of Governance.

Source: Xinhua

(Editor:李佳)

  • Do you have anything to say?

双语词典
dictionary

  
Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • Chinese Navy soldiers hold an evening party marking the upcoming 62nd National Day aboard Chinese Navy hospital ship "Peace Ark" in the Pacific on Sept. 28, 2011. The Chinese National Day falls on Oct. 1. (Xinhua/Zha Chunming)
  • Photo taken on Sept. 30, 2011 shows the crowd at the plaza of Beijing Railway Station in Beijing, capital of China. The railway transportation witnessed a travel peak with the approach of the seven-day National Day holidays on Friday. (Xinhua)
  • A man wearing high-heel shoes takes part in the 3rd annual Walk a Mile in Her Shoes, an event when men literally walk in women's shoes to raise awareness about ending violence against women, at Yonge-Dundas Square in Toronto, Canada, Sept. 29, 2011. (Xinhua/Zou Zheng)
  • Photo taken on Sept. 29, 2011 shows a cargo ship in danger on the sea near Zhuhai City, south China's Guangdong Province. Cargo ship Fangzhou 6 of Qingzhou of southwest China's Guangxi Zhuang Autonomous Region lost control after water stormed into its cabin due to Typhoon Nesat on the sea near Zhuhai Thursday, leaving 12 crew members in danger. Rescuers rushed to the ship and saved them by using a helicopter. (Xinhua)
  • Actress Gong Li poses for L'Officiel Magazine. (Xinhua Photo)
  • Demonstrators from the Occupy Wall Street campaign hold placards as they march in the financial district of New York September 29, 2011. After hundreds of protesters were denied access to some areas outside the New York Stock Exchange on September 17, demonstrators set up a rag-tag camp three blocks away. Zuccotti Park is a campground festooned with placards and anti-Wall Street slogans. The group is adding complaints of excessive police force against protesters and police treatment of ethnic minorities and Muslims to its grievances list, which includes bank bailouts, foreclosures and high unemployment. (Xinhua/Reuters Photo)
Hot Forum Discussion