China ordered most companies owned by the central government to pay 5 percent more in dividends to the state from next year as the nation seeks to boost funding of social programs such as for healthcare and education.
Government companies in tobacco, petroleum and petrochemical, power, telecommunications and coal will pay the largest portion of their profits, or 15 percent, as dividends, compared with an earlier 10 percent, the Ministry of Finance said in a notice posted on its website today. They include China Petrochemical Corp., State Grid Corp. of China, China Huaneng Group Corp. and China Telecommunications Corp.
The higher dividend requirements come as China spends more on social services to reduce the burden of healthcare and education costs on families, thereby encouraging them to spend more on other goods. Premier Wen Jiabao and other leaders have stressed the need to increase the role of domestic consumption in China’s economy and to reduce the nation’s reliance on exports and investment for growth.
China’s finance ministry said three days before today’s statement on the dividend requirements that it will increase spending on healthcare, education, public housing and other social services. Central government-owned companies had 802 billion yuan ($121 billion) of profit in the first 11 months of 2010, a 50.1 percent increase from a year ago, according to the State-owned Assets Supervision and Administration Commission.
Companies in the steel, electronics, transportation, construction and trade industries, such as Baosteel Group Corp., China Eastern Air Holding Co. and Cofco Corp., will be required to pay 10 percent of after-tax profit as dividends, according to today’s statement. Manufacturers of military equipment and research institutes will be subject to a 5 percent payment, according to the notice.
Two grain and cotton reserve companies are exempt from the plan, according to today’s statement which didn’t mention financial companies. Industrial & Commercial Bank of China Ltd., the nation’s largest lender in which the Ministry of Finance owns a 35 percent stake, paid about 44 percent of its 2009 profit as dividends to investors.
The government plans to extend the compulsory dividend payment program to 1,631 companies, the State Council said last month. About 126 firms will be included in next year’s plan, according to today’s finance ministry statement.
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