The 161 state-owned enterprises (SOEs) controlled by the Chinese
central government will lose the privilege of holding on to their
profits, which totaled US$75 billion in 2005, when China changes
accounting regulations for state-owned firms.
"Establishment of the new accounting system for state-owned
enterprises should be sped up," said Chinese Premier Wen Jiabao
when he presided over a regular meeting of the State Council.
Li Rongrong, director of the State-owned Assets Supervision and
Administration Commission (SASAC), told a recent forum that the
SASAC will compile the capital operation budget of central SOEs in
2006. The budgets of other SOEs will be compiled by the Ministry of
Finance.
Originally, China's SOEs handed over all their profits to
government financial departments, and in turn drew from them the
funds they needed for investment.
After the taxation reform in 1994, SOEs were allowed to retain
after-tax profits, but had to pay higher tax than private and
foreign-funded companies. As a result, many SOEs have run at a loss
for a long time.
"The significance of the new measure lies in the fact that it
will force SOE managers to focus on protecting shareholders'
interests and pay much more attention to investment returns," said
Li.
SOEs supervised by state-owned assets administrations in
Beijing, Shanghai and Shenzhen have already begun handing over some
of their gains to the administration. The figure for Beijing and
Shanghai is 20 percent of net profits.
But no decision has yet been made on whether central SOE profits
will be handed over to the SASAC or entrusted to asset-management
companies.
(Xinhua News Agency November 24, 2006)