BEIJING—China detailed plans to make state-owned companies turn over more of their profits to the government, the latest move in a struggle between leaders of the powerful state sector and proponents of using their earnings to fund more social spending.
The Ministry of Finance said Thursday it will increase the number of firms owned by the central government that are required to pay dividends, and increase the dividend payout ratios for those state enterprises that are already in the dividend program. The change will raise the ratio by five percentage points for most firms, to a maximum of 15%.
China's government owns many of the country's biggest corporations, including China Mobile Communications Corp., China National Petroleum Corp., and Baosteel Group Corp. Following restructuring and mass layoffs starting in the 1990s, these companies have reaped enormous profits in recent years, in part because they often operate with protection against private-sector competition.
Last year, the companies owned by the central government's State-owned Assets Supervision and Administration Commission had total profits of 815.1 billion yuan, or about $123 billion, and officials have said the figure this year will exceed 1 trillion yuan. That doesn't include China's giant state banks, which are controlled by other arms of the government, or profit from companies owned by China's local governments.
State-owned companies have faced growing calls from some in the country to pay more of their earnings to the government to help fund much-needed increases in social welfare spending. In 2007, the government launched a trial dividend program, but it has been widely criticized as having limited impact. It brought in 157.22 billion yuan from 2007 to 2009, or less than 1% of total government revenue.
In November, the State Council, or cabinet, said hundreds of additional SOEs would have to pay higher dividends from 2011, but it gave no details.
State company leaders, most of whom hold senior ranks in the government, have used their considerable clout to limit the expansion of the dividend program. The increased payouts announced Thursday are still well below levels mooted in recent Chinese media reports of as much as 30%. And some analysts say a bigger concern than the headline figures is how rigidly the rules are enforced.
The rising dividend ratio "reflects a policy trend," said Zhou Qiren, a professor at Peking University and an academic adviser to the central bank. But "people shouldn't simply look at the ratio increase," he said, because the government has yet to offer detailed information about whether state firms have paid their full share of dividends in the past.
The added payments from the new program will likely have limited impact on corporate investment, because such big state enterprises generally have easy access to credit from state banks.
Currently, 99 central government-backed firms are required to pay 5% of their profits as dividends, and 18 companies pay 10%. Another 34 centrally owned companies pay nothing.
Under the new rules, 15 companies, including China's major energy and telecommunications companies, will have to pay 15% of profits in dividends. Another 78 companies in sectors including transportation and metals, will pay 10%, and 33 companies will pay 5%. Two companies that manage the government's grain and cotton reserves will continue to be exempt.
The new ratios are still far below the 33% average dividend that state enterprises pay on average in other countries, according to World Bank research. The World Bank and the International Monetary Fund have been among the most ardent advocates of an overhaul of the way China handles state firms' earnings, arguing that using the funds for costs like expanded health care would help lower China's astronomical savings rate and reduce its trade surplus.
Such arguments have come from within the government, too. Zhou Tianyong, a vice director of the research bureau at the Communist Party's Central Party School, recently suggested the government use the dividends from state firms to replenish China's national social security fund. Mr. Zhou, the central bank adviser, said the government should consult the public on how the dividend income should be spent.
