China's 169 state-owned enterprises (SOEs) under the central government are expected to lose the privilege of exclusively enjoying their profits, which totaled 75 billion U.S. dollars in 2005, when China sets about preparing state-owned capital operation budget.

"We have, in principal, reached agreements with the Finance Ministry on the budgeteering," Li Rongrong, director of the State-owned Assets Supervision and Administration Commission (SASAC), said at the national conference on state-owned assets management.

The SASAC is to compile the state-owned capital operation budget of the central SOEs in 2006. The budget of other SOEs will be compiled by the Ministry of Finance, Li added.

Originally, China's SOEs submitted all their profits to the financial departments, from which the SOEs received all the investment they needed.

After the taxation reform in 1994, SOEs were allowed to keep all their after-tax profits, but had to pay higher tax than private and foreign-funded companies. Consequently, 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 the SOE managers to realize they should protect the shareholders' interests and pay much attention to investment returns," said Zhang Fengchao, deputy director of the Beijing municipal state-owned assets commission.

The SASAC has drawn a draft plan on how to compile the budget and how to spend the yields, Li said, adding, the yields will be spent mainly on three areas: to pay the cost of SOE reform, to help readjust the distribution of state-owned economy and to promote innovation in the SOEs.

At present, SOEs, supervised by the state-owned assets administrations in Beijing, Shanghai and Shenzhen, have begun submitting part of their net profits to the administrations. Those in Beijing and Shanghai should submit 20 percent of their net profits.

As for the central SOEs, there exist disputes on whether SASAC should collect the yields directly or asset-management companies should be established to deal with the yields.

"SASAC will decide whether to set up asset-management companies according to the development," Li said at a press conference this week.

Source: Xinhua