China on Monday reviewed a plan to reform the payment system for executives at State firms under direct central government control, the latest step by the government to reform the controversial income distribution system.

At a meeting of the Central Leading Group for Comprehensively Deepening Reforms, President Xi Jinping said unreasonably high incomes at State-owned enterprises (SOEs) will be adjusted.

"China will gradually regulate the income distribution system at SOEs to make salary levels appropriate, salary structures reasonable, and strictly manage and supervise the system," he said.

Kuang Xianming, director of the Research Center for Economy at the China Institute for Reform and Development, said the plan indicates reform has moved into a critical period affecting the country's vested interests.

China has thousands of SOEs, 113 of which are directly administered by the country's central authority. These enterprises are considered the backbone of the economy, but their inefficiency, monopolies in many areas, unchecked spending and corruption have long been a source of public complaints.

Statistics showed the average annual salary of executives at centrally administered SOEs ranged from 650,000 (105,691 USD) to 700,000 CNY in 2010 and 2011. Considering that some SOEs prosper on state support, these salaries were unreasonably higher than those of government civil servants.

In addition to the much-envied high salaries, what has most irritated the public has been the so-called "invisible income," such as transportation and communication allowances and other material benefits that SOE officials enjoy.

"This has directly widened the income distribution gap in China," noted Kuang.

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