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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 move is part of a broader strategy to enhance the role of state capital in public finances.
The profit-sharing ratio is divided into five categories based on the industry and the nature of the enterprise. The first category includes only the headquarters of major state-owned companies, with a payment rate of 25%. The second category consists of monopolistic industries such as petrochemicals, power, telecommunications, and coal, including well-known firms like PetroChina, State Grid, Shenhua, and China Mobile, with a 20% profit-sharing rate.
The third category covers resource-based industries like steel, automobiles, and transportation, including companies such as Chinalco, Minmetals, CSR, and COFCO, with a 15% rate. The fourth category includes military, aerospace, and research institutes under various ministries, such as the China Aerospace Science and Technology Group, with a 10% rate. Finally, the fifth category includes entities like China Grain Reserves and Sino-Canadian Cotton, with a 5% profit-sharing rate.
This policy aligns with the "Several Opinions on Deepening the Reform of the Income Distribution System" approved by the State Council in February 2013. The document aimed to gradually increase the proportion of state-owned capital income transferred during the "Twelfth Five-Year Plan" period, with an approximate 5 percentage point rise. The latest announcement reflects the implementation of these guidelines.
Experts note that the current classification system largely follows the model established in 2007, where industries like telecommunications, electricity, and oil had higher turnover ratios. In 2007, the State Council introduced the "Opinions on Piloting the Operational Budget of State-Owned Capital," marking the beginning of profit recovery from SOEs. At that time, the highest ratio was set at 10% for key sectors, while others were at 5%, with some companies exempted for up to three years.
Over recent years, the scope and proportion of profit transfers have expanded. For example, in 2012, the China National Headquarters increased its profit contribution to 20%, while two policy-based companies, China Storage Cotton and China Grain Storage, were included in the budget and temporarily exempted from returns.
It's important to note that the 121 state-owned sole proprietorship enterprises listed by the Ministry of Finance represent only a portion of all central SOEs. Financial institutions, which are often listed or joint-stock companies, operate differently, as their dividends are determined by shareholder meetings, creating a conflict with the state-owned enterprises' profit policies.
Additionally, the "Decision" from the Third Plenary Session of the 18th CPC Central Committee outlined plans for increasing the transfer of state-owned capital profits to public finances. It set a target of 30% by 2020, with the intention of using these funds more effectively for social welfare and people's livelihood improvements.
Despite this, most of the profits from central SOEs remain within the state sector, with limited benefits reaching the general public. According to the 2013 budget, only 6.5 billion yuan out of 105.08 billion yuan in state-owned capital operating income was allocated to public budgets, accounting for just 6.1% of social security and other public expenses.
However, the proportion has been increasing. In 2014, 18.4 billion yuan was allocated from 142.6 billion yuan in state-owned capital operating income, representing a 13% share directed toward public spending.
There are differing interpretations of the 30% target. Some believe it refers to the share of state-owned capital transferred to public finances, rising from 13% to 30%. Others argue it should reflect the average profit-sharing ratio across SOEs, considering the tiered structure. Regardless, there is broad agreement that the share of profits paid by SOEs needs to be increased, and the scope of collection should be expanded further.