Dividends set to make a comeback
5 December 2006
Chinese state companies are likely to pay dividends for the first time in more than a decade next year, Li Rongrong, chairman of the State-owned Assets Supervision and Administration Commission (SASAC), told the Financial Times. Li said he hoped a proposal would be approved early next year. Beijing stopped collecting dividends from state enterprises in 1994 when many were technically bankrupt and could not afford to pay returns to the government, their main shareholder. In recent years, China's surging growth has delivered huge profits to state companies and the reinvestment of these profits is widely regarded to be a key driver of overheated investment spending. Reintroducing dividend payments could trim excess investment and raise tax revenues. Li said the SASAC would collect dividends only from industrial companies as financial enterprises were still under the control of the finance ministry.