Dividends to increase at central State firms
Updated: 2014-05-07 10:47
By Wei Tian in Shanghai (China Daily)
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In 2007, the central government began to ask SOEs to turn in a certain amount of their profits, with a starting maximum of 10 percent. The ceiling was lifted several times thereafter. Ultimately, the government wants 30 percent by 2020, as stated during the Third Plenum.
The Ministry of Finance announcement was seen by experts as a step to improve income equality, but some expressed concern about the effectiveness of the policy.
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"Executives of large SOEs may find ways to 'adjust' profits by reducing them or diverting them to their subsidiaries," he warned.
Ji Xiaonan, who heads the supervisory board of the State-owned Assets Supervision and Administration Commission, recently told the China Economic Weekly the average dividend payout rate at SOEs is less than 10 percent.
And Wu Xiaoling, vice-chairwoman of the financial and economic committee of the National People's Congress (the top legislature), has said that about 90 percent of the dividends are eventually returned to the SOEs.
Luo suggested a law that will guarantee that dividends are used "appropriately".
He said that dividends "cannot be used to compensate for shrinking land sale income or for other government expenditure, but only in a way that can benefit everyone, such as to replenish the social security fund," he said.
At the same time, the new policy will not impair SOEs' competitiveness, Luo said. "It's just what other companies do ... pay dividends to your shareholders."
Jia Kang, director of the Research Institute for Fiscal Science at the Ministry of Finance, said the average international payout ratio for dividends at listed companies ranges from 30 to 40 percent of net profit.
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