Salaries of SOE executives adjusted
- By Wu Jin
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E-mail China.org.cn, September 15, 2015
China will adjust the salaries of executives in state-owned enterprises, according to a circular recently released by the central government.
The circular, entitled the "Guidelines towards Deepening Reform of State-Owned Enterprises" has been issued to restructure the salaries of the high-ranking officers.
Those officers will be given new criteria, including an evaluation of performance during their tenures to decide their salaries.
Previously, the salaries of SOEC executives were comprised of a basic annual income and an additional bonus for performance.
"The adjustment of the salaries of high-ranking officers is targeting the definition of a more reasonable system," said Zhang Yizhen, deputy minister of China's Ministry of Human Resources and Social Security.
According to Liu Shengjun, deputy director of the CEIBS Lujiazui Institute of International Finance, the salary reform is aimed at changing the treatment of the top leaders in state-owned enterprises, who enjoy both civil servant welfare and a high enterprise salary.
They will either abandon civil servant welfare, or give up their identity as officers appointed by the central government to enjoy massive bonuses connected with the performance of their companies.
During the proceedings for the final approval of salary reform, there were reports that revealed that the China National Petroleum Corporation will slash 15 percent of the entire staff's salaries. Meanwhile, China Mobile will cut the salaries of employees above certain levels by 50 percent.
Xu Hongcai, the assistant minister of China's Ministry of Finance, said the guideline has actually set the market and government apart. However, Xu also added that the reform is still in an ascent stage, in need of more deliberation for improvement.
How to prevent the run-off of national assets?
The guideline also stipulates a number of policies to curb the embezzlement of national assets for personal interests.
Guo Fanli, director of the research department of the China Investment Corporation, said, "the Guideline will basically prevent the loss of national assets and prevent them from being sold or embezzled by the leaders of the state-owned enterprises who are violating laws and regulations."
How to categorize enterprises
According to the Guideline, the state-owned enterprises will fall into the category of market driven and non-profit-driven models.
The tap water, bus and natural gas suppliers belong to
non-profit companies, while, railway, petroleum and telecommunications are classified as market-driven businesses.
Based on the Guideline, the vitality of market –driven enterprises can be unleashed and utilities as well as public services can be provided by the non-profit driven enterprises.
Will there be a massive tide of state-owned enterprises to seek IPO?
In light of the Guideline, state-owned enterprises are encouraged to seek Initial Public Offering (IPO), multiplying their share-holders comprised of non-governmental investors.
The state assets concerning national security and economic channelsshould hold majority ownership when bringing in new investors.
Non-profit enterprises can also multiply their ownership by means of purchasing, franchising and mandating.
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