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Time to break up monopolies


2006-07-28
China Daily

Breaking monopolies is the most effective way to cut the unreasonably high salaries of some employees at monopoly companies, says a signed article in Dazhong Daily. An excerpt follows:

One of the biggest stories to hit the headlines recently has been about measures introduced to cut their employees' excessively high salaries.

China Huadian Corporation, one of the country's biggest electricity suppliers, the National Electricity Grid Company and several other monopoly firms are cutting or planning to cut down their employees' salaries.

The higher-than-normal level of subsidy enjoyed by the employees of monopolies, such as electricity supply, had long been criticized by the public.

The current self-examination of these companies seems to be a reaction to this public criticism.

However, this move is more like a knee-jerk reaction to public pressure than a concrete measure to cut the excessive salaries enjoyed by some in these monopoly companies. In addition, this will do nothing to stamp out the corruption brought about by these firms' monopoly status.

First, if left to their own devices, by how much would these monopolies actually cut their employees' payments?

The axe may only fall on salaries and not on other forms of subsidy, which are usually higher than the basic wage. It is also likely that low-level employees will suffer the greatest pay cuts.

They will not stop such high salaries as long as they continue to operate as monopolies. Employees' high salaries as a direct result of this monopoly status.

Hence the only solution is to break these monopolies. As long as the market is open and fair competition is encouraged, profits will fall and these companies' excessive payments will naturally disappear.

As China has started to open up its financial sector, Chinese banks are facing increasingly stronger competition from overseas lenders. The plight of some domestic banks ought to provide some useful food for thought for companies still enjoying the fruits of their monopoly status.

 
 
     
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