China Orders State-owned Firms to Pay More to Beijing

March 18, 2011
Tobacco, energy and telecom companies will have to pay 15% of their after-tax profits, up from 10% while steel companies will pay 10% up from 5%.

China has ordered major state-owned companies to divert more of their profits to the central government, giving Beijing more money to spend on priorities such as education, healthcare and the military.

The finance ministry announced the increase in dividend payments on March 17 as Beijing seeks to improve social services and boost domestic consumption in order to reduce the country's heavy reliance on exports to drive growth.

It is also seeking to narrow the country's widening wealth gap.

The central government owns many of the country's major companies such as Sinopec, Asia's largest refiner, and China Mobile, the world's biggest mobile operator by subscribers.

These companies have raked in enormous profits in recent years due to booming economic growth and protection from the government against their private-sector rivals.

Starting next year, companies mainly in the tobacco, energy and telecoms industries will have to pay 15% of their after-tax profits to the central government, up from 10% currently, the finance ministry said.

Companies in the next group, mainly in the steel, transport and construction sectors, will see their dividend payout ratios increase to 10% from 5%.

The smallest dividends will be paid by companies mainly in the weapons and heavy machinery sectors, such as China National Nuclear Corp. and China Aerospace Science and Technology Corp. They will have to turn over 5% of their profits.

China Grain Reserves Corp. and China National Cotton Reserves Corp. will not be required to pay dividends.

The increase has been approved by the State Council, or cabinet.

China resumed collecting dividends from state-owned companies in 2007 after suspending payments in the 1990s during massive restructuring and mass layoffs in the sector. Beijing collected 157.22 billion yuan (US$23.8 billion) in dividends from 2007 to 2009, state media reports said previously.

Copyright Agence France-Presse, 2011

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