China's cabinet has demanded a reform of the salary-setting mechanism for state-owned enterprises (SOEs) to increase their efficiency.

Authorities should establish a salary-setting and growth mechanism that is suited to the labor market and linked to the SOE's economic performance and labor productivity, according to a guideline issued by the State Council.

The work should focus on "increasing the vitality and efficiency of SOEs," the guideline said.

The total amount of salaries for SOEs should be better determined according to their performance, and management of the companies' inner salary distribution should be improved, it said.

"Oversight of the SOE salary distribution should be strengthened, state capital should be supported in becoming stronger, doing better and growing bigger, and income distribution should be more reasonable and orderly," the guideline said.

China has pushed for SOE reforms, including the mixed-ownership reform and corporate reform, to inject vitality to a large number of previously underperforming enterprises.

SOEs reported faster profit growth in the first four months, with combined profits rising 18.4 percent from a year earlier to surpass 1 trillion yuan (about US$158 billion), according to the Ministry of Finance.

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