By Li Zengxin (chinadaily.com.cn)
Updated: 2007-12-12 13:33

The Ministry of Finance (MOF) announced Tuesday that it had jointly issued a new rule governing distribution of central state-owned enterprises (SOEs) profits with the State-owned Asset Supervision and Administration Commission (SASAC).

According to the Administrative Methods on Collection of Earnings from Central State-Owned Assets, SOEs supervised by the central government will now pay capital gains to the State on differentiated rates.

There are three categories of SOEs: enterprises in resources-related industries including tobacco, oil and petrochemical, energy, telecommunications, and coal will pay in 10 percent of their after-tax profits to the State. Those in more competitive sectors such as steel, transportation, electronics, trade, and construction are subject to a 5 percent rate. The rate for military industries and transformed science research institutes will be decided in another three years.

According to the new rule, central SOEs will pay capital gains under the supervision of both MOF and SASAC with exception of China Tobacco Corporation, which is monitored by MOF only.

Earnings from central State-owned assets refer to profits to the State from solely State-owned companies; dividends to the State from SOEs where the State holds a stake; liquidation income from solely State-owned companies; liquidation income in proportion to the State holding from SOEs where the State holds a stake; and other income.

The new rule puts an end to the practice of China's SOEs not paying dividends to their largest or major shareholder - the State, said analysts.

The differentiated rates for the three groups are aimed to better serve central SOEs in different sectors with varied competition levels, based on their real situations and stages of development, according to Li Rongrong, chairman of SASAC. The World Bank also said in its latest report that a multi-layer profit collection system could help enhance growth potential of China's central SOEs.