Recruiting in China

A draft of a general regulation to cap salaries of high-level executives in State-owned enterprises (SOEs) will be submitted to the State Council for approval soon, an expert said yesterday.

The new regulation, drafted by the Ministry of Human resources and Social Security, also clarifies the system to assess performance and rules for expenditure, Liu Junsheng, a researcher with the ministry, who has participated in the discussion of the draft over the past six months, said.

"The new regulation provides a guideline and legal basis for supervising the salary structure of high-level management of all SOEs," he said.

The Ministry of Finance earlier this month solicited views on measures to regulate salary management in State-owned financial enterprises, which reportedly plans to set a ceiling of 2.8 million yuan ($411,765) on the annual pretax salary.

"Recent media reports on the fat salary packages of SOE executives have drawn the attention of the central government," Liu said. "So they have asked related departments to put a limit on the amount."

The new regulation limits the salary ratio between high-level and low-level executives to 10 to 12, the National Business Daily quoted sources as having said yesterday.

However, Liu said a final decision was yet to be taken. "The current average ratio is 10 to 14."

According to the National Bureau of Statistics, in the first three quarters of 2008, the average income of SOE employees was 20,576 yuan ($3,026).

The 2006 statistics from the State-owed Assets Supervision and Administration Commission show that the average salary of principals with 149 large SOEs was 531,000 yuan ($78,088).

Liu said the salaries of SOE executives should be controlled "because they are appointed by the government, and not chosen by their market value, and SOEs enjoy more favorable policies and resources than their private counterparts".

Dong Xian'an, a senior macro-economic analyst with the State-owned Southwest Securities, said the increasing income gap between high-level executives and common employees has affected the social stability, especially amid the global financial crisis.

"This regulation draft has come a little late. The gap has already grown too huge in recent years," he told China Daily.

"The salaries of high-level executives in SOEs should be made transparent to the public," he said.

However, industry experts said that a ceiling on salaries might affect the ambitions of some enterprising SOE executives.

"The government should pay attention to the incentive system in order to encourage SOEs to play a bigger role in the Chinese economy," Ma Guangyuan, a business commentator, was quoted as saying in the Information Times.

Earlier this month, the State-controlled Guotai Jun'an Securities was reported to have a 320-million-yuan salary ($47.06 million) plan in 2008, an average of 1 million yuan ($147,059) for each member of the staff.