The central government is right to resume taking dividends from the SOEs, but they should be raised, says an article in Nanfang Metropolis News. The following is an excerpt:

The Ministry of Finance and the State-owned Assets Supervision and Administration Commission (SASAC) released a joint circular on Tuesday, which specified the percentage State-owned enterprises (SOEs) should hand in to the State from their profits.

This finalizes arrangements for the State to collect dividends from the profits of SOEs. The practice was previously suspended for years. However, the dividends are far too low in relation to the profits SOEs reap.

The SOEs must hand over less than 4 percent of their profits to the State this year, this is really marginal.

As businesses owned by the State, it is only natural that SOEs pay dividends to the government. After all, their profits are based on State investment and other support from the administration.

In the 1990s, the government spent about 20 percent of its income to subsidize the SOEs, which were struggling for survival before they introduced reforms to improve their efficiency and profitability.

Many SOEs are listed on the stock market and offer attractive dividends to their shareholders. Under such circumstances, it would not be fair to the central government to be left out.

The dividends will help the central government improve the welfare of the middle and low-income groups.

Now that SOEs are required to pay dividends to the government it is hoped they will curb their investments, and help reduce the threat of the economy overheating.

(China Daily December 14, 2007)