Life of Guangzhou - Public Unhappy with SOEs' Huge Profits

China's State-owned assets (SOA) surged in the past seven years, when Li Rongrong, who stepped down as head of the SOA watchdog late last month, was in office. However, that success invited accusations of monopoly and corruption from the public as well as plaudits.

The chief of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), established in 2003, left his office on August 25.

During Li's term, the number of State-owned enterprises (SOE) affiliated with the central government was trimmed from 196 in 2003 to the current 123 through consolidations. Thirty of these enterprises were included in the Fortune 500 list.

By 2009, the total assets of 108 central SOEs that publish their financial information had reached 21 trillion yuan, triple the 7 trillion yuan of 2003.

The achievements, however, didn't help Li and SASAC win much fame among the grassroots of society, which was a source of confusion for the "Big Boss" of the large SOEs. "Why are we always blamed both when the SOEs suffer losses and make profits?" Li was once reported as saying.
"It's understandable that the public are angry when they have contributed to a big cake but can't share it," a commentary on Thursday's Southern Weekend said.

The huge profits of the SOEs are not won through their strong competitive power, but are closely related to their monopoly of certain key industries that private enterprises do not have access to. At the same time, they can use land for free and obtain low interest loans, the article argued.

According to statistics released by the All-China Federation of Industry and Commerce on August 29, the profits of China's Top 500 private companies totaled 218 billion yuan, less than the combined profits of the top two large SOEs, China Mobile and PetroChina, which came to 249.1 billion yuan in 2009.

The public hasn't benefited much from the SOEs' success. The central SOEs turned over under 40 billion yuan in dividends to the central government in 2009, less than 6.2 percent of their 600 billion yuan after-tax profits.

Instead, frequent reports of major SOEs pushing record high prices in land auctions showed that their profits have been largely devoted to investment in property.

Guo Jianguang, a professor at the Central University of Finance and Economics said that under the country's Constitution, the public were the real shareholders of the SOEs, which gave them the right to a share of the profits.

Apart from the profit issue, corruption in SOEs has also left the public less than satisfied. Thirty-five senior executives of large SOEs faced corruption charges last year.

The lack of supervision over executives was singled out as the major reason for this problem. Unlike managers in private companies, most senior managers in SOEs have official titles, while many are nominated by the Organization Department of the CPC Central Committee.

SASAC has responded by trying to reform the way it hires personnel. It has recruited 113 senior officials since 2003 and have 20 more posts of higher level open this year.

[More China News]