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Reform targets SOE payment packages
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CHINA’S efforts to shake up its state sector are targeting the paychecks of those running the country’s state-owned firms.
The Political Bureau of the Communist Party of China (CPC) approved a plan last week to reform the payment packages of top executives at China’s large state-owned enterprises (SOEs) and detailed measures to regulate executive salary and corporate expenses.
For years, the yawning gap between what is paid to top executives and average workers at these companies has led to discontent among the public. Senior executives at these firms make an average of 700,000 yuan (US$113,636) per year. Those working in the country’s financial sector earn millions of yuan in salary alone, before bonus and reimbursement for corporate expenses.
The move to close the gap between top executives and average workers is part of a broader plan to reform the inefficient state sector by attracting private investment and hiring more qualified professionals to manage the firms in an increasingly market-based economy.
Broad guidance on regulating SOE executive pay was issued by several government agencies in 2009 but is viewed as having limited impact since it only introduced an across-the-board payment solution. The latest plan would establish a differentiated payment scheme based on the nature of these enterprises.
Analysts say the scheme would distinguish between SOEs in competitive industries, where bigger pressures demand adjusted wages, versus those mainly serving the public interest.
Mixed ownership
Different payment standards will also apply to professional managers hired to run the company and executives appointed by the government.
A key theme in the ongoing reform of China’s SOEs has been promoting mixed ownership through private investment as well as allowing staff to hold company shares. This has shifted the focus more toward improving the return generated from state capital and less on running the company.
The Chinese leadership vowed to let the market play a decisive role in the economy after a CPC national plenum laid out a wide-ranging reform plan to put the world’s second-largest economy on a more sustainable track.
China has been slowly reforming its state sector in the past few decades and has established the State-owned Assets Supervision and Administration Commission to supervise more than 100 state firms. Top managers at SOEs are appointed by the CPC. Some executives go on to assume government posts after finishing their tenure at state companies.
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