China to cut SOE executives' salaries

The top leadership of the Communist Party of China (CPC) approved plans and decided on Friday to cut hefty salaries for executives of large state-owned enterprises (SOEs).

During a meeting presided over by Chinese President and CPC Central Committee General Secretary Xi Jinping, the Political Bureau of the CPC Central Committee approved plans to reform the payment system that determines centrally-administered SOE executives' salaries and the size of their expense accounts and other privileges.

"Deepening the reform of the payment system for executives of major SOEs is an important part of China's efforts to establish a modern corporate system and push forward the reform of the income distribution system," said a statement released after the meeting.

Reform of the payment system for executives of major SOEs should proceed in light of the basic reality that China is still in the primary stage of socialism, it said

The authorities should gradually standardize the income distribution system for SOEs which features appropriate payment, reasonable structure, standardized management and effective supervision.

"Unreasonably high or excessive salaries should be adjusted," it said.

China has thousands of SOEs, 113 of which are directly administered by the country's central authority. These SOEs are considered the backbone of the economy, but their inefficiency, monopolies in some sectors, unchecked spending and corruption have become a source of public complaints.

The meeting urged the centrally-administered SOEs to improve their corporate ethics, saying income gaps between executives and ordinary employees, and salaries among different industries should be maintained at an appropriate level.

The reform plans called for ceilings to be set on SOE executives' expense accounts and for prohibitions to be placed on their official vehicles, offices, training, business receptions, domestic and overseas business trips and communications.

They strictly prohibit any spending of public funds for personal purposes, vowing to stop misuse of such funds for club memberships, healthcare, entertainment and anything else irrelevant to executives' duties and SOEs' operations.

The Political Bureau urged locally-administered SOEs to follow suit. It also approved the other two reform plans -- one on Party building and the other on university exam and recruitment systems.

On Aug. 18, Xi told a meeting that major SOEs must make sure their salary level is proper, their salary structure is reasonable, their salary management is strict and efficiently supervised.

Statistics showed the average annual salary of executives at centrally administered SOEs ranged from 650,000 (105,691 U.S. dollars) to 700,000 yuan in 2010 and 2011. These salaries were significantly higher than ordinary employees and those of government civil servants.

In addition to high salaries, many top executives at major SOEs carry a vice-ministerial or ministerial-level ranking that brings them so-called "invisible income" such as transportation and communication allowances and other material benefits.

The salary reform was part of a broader reform plan in the SOE sector, which have centered on bringing in private capital to foster modern governance systems and develop a mixed-ownership economy.