Start SOE reform with pay cut

Research by the Ministry of Human Resources and Social Security shows that there is a sharp income discrepancy among the executives of China's State-owned enterprises, with some executives receiving annual salaries of millions of yuan. The authorities are planning to cap or lower the salaries of SOE executives and more should be done, says an article from Beijing Youth Daily. Excerpts:

It is not uncommon for business executives to earn an annual salary of millions of yuan in a market economy, and a host of executives in private enterprises and foreign-invested enterprises also do. What concerns people is not necessarily the high salaries, but the background of executives working in State-owned enterprises, some of whom also have a high government rank and thus enjoy multiple identities at the same time.

Some high-ranking officials become the executives of SOEs only by administrative appointment rather than through the selection mechanism of the market. As a result, these executives enjoy high salaries and the perks of being government officials - such as better pensions and other welfare benefits and better social networks - at the same time.

To regulate the SOE remuneration mechanism, simply lowering salaries is not the solution. It is crucial to set a boundary between being a business executive and being a government official.

In the Decisions on Major Issues Concerning Comprehensively Deepening Reforms adopted at the close of the Third Plenary Session of the 18th Communist Party of China Central Committee there is a vow to carry out reform of SOEs. The separation of officials' franchise operation of enterprises and the elimination of all forms of administrative monopoly among State-owned enterprises are the major steps.

State-owned enterprises should increase the proportion of market-oriented recruitment, so that salaries of SOE executives can be justified.