Editorials

Profitable use

(China Daily)
Updated: 2010-08-21 07:07

The success of China's efforts to reform State-owned enterprises (SOEs), most of which were on the verge of bankruptcy until just a decade ago, is clearly evident in their surprising capacity to make profits now.

Yet the gist of SOEs reform is not only about profitability, especially when the income gap between the State and the private sectors has grown huge today.

Latest official data show the SOEs' aggregate profit in the first seven months of this year was more than 1 trillion yuan, up 50.1 percent year-on-year.

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At a time when the world is yet to find a solid footing for lasting economic recovery from the worst recession in decades, Chin's policymakers can take some comfort from the SOE's strong performance.

Soaring profits will not only cushion the State sector against any uncertainties associated with the recovery at home and abroad, but also add to the national treasury to finance future government-led stimulus programs, if necessary.

But while recognizing the importance of SOEs' endeavors in transforming themselves, policymakers should pay more attention to the proper use of their ever-growing profits.

The favorable taxes, and fiscal and industrial policies the government has implemented to facilitate the reform and development of SOEs are not meant to only boost their bottom lines and, thus, the salaries of the already highly paid employees.

Media reports say the annual average salary in the private sector was only 18,199 yuan ($2,688) in 2009. But employees in the central government-administered SOEs on average make 54,000 yuan ($7,941) a year, according to the chief of the State Assets Supervision and Administration Commission.

It is time a bigger share of the SOEs' profits was used to address social problems such as the widening income disparity in society.

China Daily

(China Daily 08/21/2010 page5)