Feb 15, 2012
Translated by Ma Zheng

The Ministry of Finance issued an announcement recently saying that the number of state-owned companies required to submit dividends to the Ministry of Finance has expanded. In the latest round of additions, 301 enterprises have been added to the list of companies required to transfer a portion of their profits to central government coffers.

The expansion of the number and range of SOEs required to pay dividends is part of broader reforms aimed at shifting industrial profits on to the government's books in order to help fund an expansion of China's social services.

The announcement stipulates that as of 2012, enterprises under the direct control of the Ministry of Industry and Information Technology (MIIT), the General Administration of Sport (GAS), the state-owned cultural enterprises sponsored by State-owned Property Management Office, some of the enterprises under the control of Ministry of Health and the State-owned Assets Supervision and Administration Commission (SASAC) will all be included in the list of companies required to pay dividends to the central government.

In addition, the highly profitable Capital International Airport Co., Ltd, which operates under the control of the Civil Aviation Administration of China (CAAC) and recorded annual profits in 2011 of 595 million yuan, will also be required to pay dividends to the Ministry of Finance.

Altogether the Ministry of Finance has added 301 enterprises to the list, this follows last year's addition of 1,631 enterprises which were under the control of 5 central government ministries. The central government began collecting dividends from those SOE in June last year.

The SOEs that have been added to the list this year mainly operate in the service industry, consulting, trade, publishing, electronics and scientific research.  

SOEs may be required to submit either 5, 10 or 15 percent of their profits to the government, though some SOEs have also been exempted from having to submit dividends.

According to the announcement, all of the 301 companies that have just been added to the list will be required to submit 5 percent of their profits to the state.

In the case of the Beijing International Airport Company, this represents about 30 million yuan a year in transfer payments.

It's estimated that there are about 6,000 SOEs that operate directly under the control of some 82 separate central government bodies that have been marked as targets for the policy. One of the talking points surrounding this year's negotiations is the fact that CAAC will be taking part.

In an earlier EO report, we quoted a person close to the negotiations over which companies would be added to the list as saying, "most of state-owned enterprises that operate directly under the control of central ministries are small, and are less profitable, so, at the most, it will only result in an additional few hundred million yuan in revenue." The person went on, "but that's not really the point, it's more about the principle of ensuring that these state-owned enterprises be should be paying their fair share of dividends to the state."

As for the spending of the money, Chen Shaoqiang (陳少?gòu)?qiáng)), the deputy director for Capital Research Department of the Research Institute for Fiscal Science said that we should increase dividends collected from the SOEs by guaranteeing that the SOEs have successfully transformed themselves and spend more money on social security so as to ensure that the dividends are shared by the public.

Links and Sources
Ministry of Finance: 關(guān)于擴(kuò)大中央國(guó)有資本經(jīng)營(yíng)預(yù)算實(shí)施范圍有關(guān)事項(xiàng)的通知
Shanghai Securities News: 301家國(guó)企新納入國(guó)有資本經(jīng)營(yíng)預(yù)算范圍
The Economic Observer Online: Getting More SOE to Pay Dividends