Economic Observer Online
November 5, 2010
translated by Tang Xiangyang
Original Article: [Chinese]

The EO has learned that state-owned enterprises that are under the control of a select few central government departments, also known as centrally-owned enterprises (COE), will be required to pay dividends to the central government. In addition, companies that already submit dividends to the central government will be required to pay more.

On November 3, at an executive meeting of the State Council, participants decided that as of 2011, the 1,631 COEs that operate under five central government departments and two industrial enterprise groups will be designated as enterprises that are required to pay dividends to the central government. At the same time, there will be an appropriate increase in the ratio of dividends that COEs will be required to submit to the central government.

An official from the Ministry of Finance (MOF) told the EO, that this is an ongoing trend and that more centrally-owned enterprises that are under the control of various central government departments and ministries will gradually be added to the list of companied required to submit dividends to the section of the MOF budget responsible for collecting payments from state-owned enterprises.

The rate of dividends paid by the resource-oriented COEs to the central government will be raised from 10 to 15 percent, COEs that previously submitted 5 percent of their profits to the state will now be expected to hand over 10 percent. Those COEs that have not been required to submit dividends in the past will be required to hand over 5 percent of their profits to the central government.

The new regulations will apply to companies that operate under the control of the following five central governent departments: the Ministry of Agriculture, the Ministry of Education, the Ministry of Culture, the State Administration of Radio, Film and Television and the China Council for the Promotion of International Trade.

The two industrial enterprise groups affected by the State Council decision are the China Publication Group and China Arts and Entertainment Group.

The drafting of the operational budget of centrally-owned asset for 2011 will begin in the middle of November and it will be drafted based on assumptions that dividends from COEs are going to increase from 2011.

However, the EO has learned that all the SOEs under the five ministries are small-scale enterprises and therefore no so profitable and therefore the amount of revenue expected to be raised from these companies will only be a few hundred million yuan or even less.

In 2009, the central government collected 42 billion yuan in dividend payments from COEs and the contributions from these recently included 1,631 companies is likely to seem trvial by comparison.

However, a representative from the Ministry of Finance has said, the point is not so much to increase revenue, but to bring these COEs that are under the control of various central government departments under the supervision of the MOF, "no matter if they're profitable or suffering losses, if we can bring them under our supervision we will."

According to reports, an official announcement will be made my the Ministry of Finance in the near future.

Links and Sources

China National Radio: Image

This article was edited by Paul Pennay