A Policy That Pays Dividends

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I recently reported on the issue of dividend payments by state-owned enterprises, as it had been suggested in the Economist, and elsewhere, that the lack of dividend payments was resulting in excess fixed asset investment by Chinese firms. It now seems that, in a further effort to slow economic growth, dividends will now be demanded. Forbes reports:

    “China’s state-owned enterprises are expected to begin paying dividends to the government from 2007, Caijing magazine cited Li Rongrong, director of the State-owned Assets Supervision and Administration as saying.”

It is suggested that the new rules would cover state-owned enterprises, as well as
“companies and financial institutions that have received capital injections from Central Huijin” (the state investment vehicle that has bailed out local banks).

A balancing measure, to soften the blow for those big spenders who may lose out as a result of the new policy, is said to be the introduction of stock options for state-owned enterprises (whatever that may mean in practice).

See news source:

(Updated 20/09/2006)

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