State-owned banks and enterprises should give dividends to state shareholders, suggested Zhou Xiaochuan, president of the , in his speech delivered at the China Entrepreneur Summit 2005 in Beijing on Monday.
Zhou added that because the reform of state-owned enterprises (SOEs) is covered less in the media these days, there's a mistaken belief that reform is complete. He said there is actually still much reform to be implemented.
Zhou said that the next phase of reform would be to have SOEs pay dividends to state shareholders. This would complement other reforms in the areas of managing legal entities, clarifying property ownership, and improving supervision mechanisms.
Further, Central SAFE Investments Ltd, the holding company of the country's three largest state-owned commercial banks -- Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and Bank of China (BOC) -- should have the banks pay the dividends, Zhou pointed out.
According to an official from BOC, a new index -- Profit Return Rate of Stocks -- has been set to evaluate the profit to be returned to shareholders. According to international standards, this rate should be around 11 percent. Last year, BOC handed in more than 10 billion yuan (about US$1,239 million) in profits to Central SAFE Investments Ltd. CCB is also confident that its Profit Return Rate of Stocks will also match international standards this year.
Zhou pointed out that the reform of SOEs had made progress in the areas of taxation and accounting, laying the groundwork for the payment of dividends.
According to Tuesday's National Business Daily, a report from the International Monetary Fund (IMF) supports dividends payment because this would further improve the market consciousness of SOEs and increase their ability to invest in the market. Furthermore, dividends paid by SOEs will help the government establish and maintain social security and pension funds, thereby stimulating China's domestic consumption.
(China.org.cn by Xu Lin, December 15, 2005)
