State-Owned Firms Get Greater Freedom to Set Wages

China’s state-owned enterprises (SOEs) have been given more freedom to set their employees’ wages, as Beijing’s seeks to revitalize the country’s stodgy state assets.

Most SOEs will no longer have to present their annual salary budgets to authorities for approval, according to a document (link in Chinese) published by the State-owned Assets Supervision and Administration Commission (SASAC) on Wednesday.

SASAC’s role as the SOE watchdog will now be to monitor wages and “offer guidance,” the document said. The policy took effect this month.

A 2017 report from the Organization for Economic Co-operation and Development, a club of rich countries, said that about 40 million people work for both locally and centrally owned SOEs.

The deregulation of wages comes amid Beijing’s ramped-up efforts to overhaul state-owned assets by introducing some market-oriented reforms. Such measures include so-called mixed-ownership reform, which was announced in 2013 and seeks to encourage nonstate companies and foreign investors to take stakes in SOEs.

The current SOE wage system was introduced in 2008, when the State Council, China’s cabinet, issued a policy that relaxed SASAC’s total control over wages. SASAC relinquished more of its power two years later, when it rolled out a policy that allowed SOEs to write their own salary budgets, based on factors such as their revenue and human resources.

“I would say, this will be a boon to most workers as they will personally enjoy one or more benefits,” said a department head at one of China’s largest state-owned insurance companies.

A source at one of China’s big three wireless carriers, who asked for anonymity as he is not permitted to speak to the media, said most senior officials’ salaries in the industry are already closely linked with the officials’ performance. He added that part of the promotion process for anyone above a certain level includes a review of the person’s performance over the previous three years.

This is a continuation of China’s step-by-step approach to reform SOEs, said Hu Chi, an analyst at SASAC’s research arm. He added that China has implemented different polices for different type of SOEs.

For example, the new salary rules don’t apply to SOEs that are classified as strategic and critical to to China’s national security and economy. SASAC didn’t specify which sectors are so classified.

Contact reporter Mo Yelin (yelinmo@caixin.com)