HED: Start SOE reform by income distribution reform

Income distribution reform for employees of State-owned enterprises is a good starting point for much-needed SOE reform to end SOEs' monopoly in some fields, promote market competition and improve the operating efficiency of the SOEs, says an article in China Business News. Excerpt:

A recent media survey exposed the average annual wage of Chinese SOE employees in 2012, 111,357 yuan ($18,200), which rises by 8.2 percent year-on-year. The number is 3.8 times more than the income of their counterparts in private enterprises.

To fill the income gap, the State Council pledged to increase the wages of employees at private enterprises and control the SOE employees' wages and frequency of raises by 2015.

The income distribution reform must also target SEOs' executive staff, who make a significant amount more than workers in lower positions. The executives enjoy bonuses that depend on their bureaucratic ranks and the profits of business managers.

Yet, in the end, all possible losses of the SOEs, managed by them, are paid by the central government.

The government should gradually reduce subsidies and preferential policies given to SOEs, and the market should open to private and foreign competitors to benefit both the consumer and the development of enterprises.

As for the SOEs of key areas for the national economy, their budget should be put under strict scrutiny by the National People's Congress, and their financial affairs must be audited by the audit authorities.

The executives of the SOEs should no longer enjoy the benefits of civil servants.

The government should require SOEs to hand in more profits to the government to pay for the rising input of public services and let the people share the profits of SOEs.