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Increase in the proportion of state-owned enterprises’ income from state-owned assets
The Ministry of Finance announced on May 6th that it will further increase the share of profits collected from central state-owned enterprises (SOEs). Since 2014, the percentage of SOEs required to pay profits has been raised by 5 percentage points. This policy is part of a broader effort to reform the income distribution system and enhance the role of state capital in public finances.
The profit-sharing ratio for SOEs is divided into five categories. The first category includes only a few top-tier headquarters companies, with a payment rate of 25%. The second group consists of monopoly industries such as petrochemicals, power, telecommunications, and coal, including major firms like PetroChina, State Grid, Shenhua, and China Mobile, which now pay 20% of their profits.
The third category covers resource-based industries like steel, automobiles, and transportation, including companies such as Chinalco, Minmetals, CSR, and COFCO, which now contribute 15% of their profits. The fourth group includes military, aerospace, and research institutions, such as the China Aerospace Science and Technology Group, with a payment ratio of 10%. Finally, the fifth category consists of entities like China Grain Reserves and Sino-Canadian Cotton, with a 5% profit-sharing rate.
This policy aligns with the State Council's "Several Opinions on Deepening the Reform of the Income Distribution System," approved in February 2013, which aimed to gradually increase the proportion of state-owned capital income turned over during the "Twelfth Five-Year Plan" period. The Ministry of Finance’s recent announcement reflects the implementation of these guidelines.
Experts note that the current classification structure largely follows the model established in 2007, where high-profit sectors like energy and telecommunications were subject to higher rates. In 2007, the government introduced a three-stage plan for recovering profits from SOEs, starting with a maximum rate of 10% for key industries and 5% for others, with some companies temporarily exempted.
In recent years, the share of profits contributed by SOEs has grown, and more companies are being included in the scheme. For example, in 2012, the China National Headquarters increased its profit-sharing rate to 20%, while China Storage Cotton and China Grain Storage were added to the operating budget but did not have to return profits that year.
The 121 SOEs listed by the Ministry of Finance represent only a portion of all central SOEs. Financial institutions, such as banks and insurance companies, are mostly listed or joint-stock companies, and their dividends are determined by shareholder meetings, which creates a conflict with the state's profit collection goals.
Additionally, the "Decision" passed at the Third Plenary Session of the 18th CPC Central Committee set a target of transferring 30% of state-owned capital proceeds to public finances by 2020, with a focus on improving people's livelihoods. While this goal remains ambitious, the actual amount allocated to public spending has been increasing over time.
According to the 2013 budget, central SOEs generated 105.08 billion yuan in capital operating income, but only 6.5 billion yuan—about 6.1%—was directed toward social security and other public services. By 2014, the amount transferred to public budgets rose to 18.4 billion yuan, representing 13% of total capital profits.
There is still debate within the industry about what exactly the 30% target means. Some believe it refers to the share of state-owned capital profits going to public finances, while others argue it should reflect the average profit-sharing rate across SOEs, given the tiered structure. Despite differing interpretations, there is general agreement that the proportion of profits paid by SOEs should continue to rise, and the scope of the policy should expand to include more enterprises.