China's largest state-owned companies have been required to provide monthly reports to the government on all fixed-asset investments, in a move intended to curb wasteful spending by cash-rich state monopolies, the State-owned Assets Supervision and Administration Commission said.
The move is the latest attempt by Beijing to temper overheated investment in new factories, production lines and real estate projects that continues to accelerate growth in China despite more than three years of intermittent austerity measures.
Fixed-asset investment in China increased 24 per cent last year, to 10.98 trillion yuan, boosting headline gross domestic product growth to 10.7 per cent for last year, up from 10.4 per cent in 2005.
'The government's cooling policies have not been implemented that strictly because officials are faced with a dilemma - they want to make adjustments to the economy but they also have a big incentive to keep it growing strongly in order to protect the banking system and ensure social stability,' said Citigroup economist Huang Yiping.
Requiring the country's centrally controlled state-owned enterprises to provide detailed descriptions of all capital spending is also the first step towards establishing a new system under which these companies will be required to pay dividends to the state.
Senior officials, including commission chairman Li Rongrong, have indicated that a dividend programme is likely to be set up later this year, perhaps receiving approval as early as the National People's Congress annual session next month.
'This new requirement is a small but historic step towards forcing state companies to pay dividends to their major shareholder,' Mr Huang said.
