- China Business Blog - http://www.chinabusinessservices.com -

A Policy That Pays Dividends

I recently reported on the issue of dividend payments by state-owned enterprises [1], 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:

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)