China will soon release a rule on the management of State-owned capital, requiring state-owned enterprises to submit their dividends to the government.

"The rule, which was shaped by the Ministry of Finance and the State-owned Assets Supervision and Administration Commission (SASAC) earlier in the year, is under review by other government departments now," a source close to the SASAC told China Daily.

"They have reached a consensus on the major principles, but the final say is with the State Council, China's cabinet," said the source. "The release date should not be too far away."

He said the rule mainly outlines principles and directions on budgeting State-owned capital, with detailed regulation on the proportion of profits to be paid out and how they would be used not yet decided.

Li Rongrong, minister of the SASAC, told a forum in Singapore that the country's 165 State-owned enterprises (SOEs) would probably begin to pay dividends to the government from the beginning of next year.

"The payouts will go to public utility projects and fuel the development of some industries," Li was quoted in Caijing magazine as saying.

Statistics show that revenue from SOEs totalled 950 billion yuan (US$118.7 billion) in 2005, of which 53 percent was contributed by the top 10.

Improved management and innovative technology have seen the country's 165 key central SOEs realize 351.65 billion yuan (US$43.96 billion) in first-half profits, up 16 percent on a yearly basis. And their sales revenue also climbed 20.6 percent compared with the same period last year.

The SOEs' performance has raised public concern that part of their revenue should be given to the government to supplement public fiscal needs.

"Chinese SOEs so far have not paid any dividends because they have had their own difficulties in the past, meaning we had to let them keep the profit for their own development," said Li. "But now their situation is much better."

China currently has over 120,000 SOEs with the SASAC overseeing 165 of the key businesses. Their revenue after tax, or net profits, is used for their development.

According to a World Bank report it is common for SOEs to give their dividends to the finance ministry for public payment in OECD (Organization for Economic Cooperation and Development) countries.

If China's SOEs could offer 50 percent of their profits to the government, which accounted for 6.5 percent of the country's gross domestic product in 2004, public funding for education and healthcare would rise by 85 percent, said the report.

(China Daily September 20, 2006)