BEIJING, Sept 13: China’s public coffers will start receiving dividends from companies owned by the central government in 2008, the State Council, or cabinet, said on Thursday.

It is up to other levels of government in China to decide for themselves if or when they want enterprises under their control to start paying dividends, according to a statement posted on the government’s official website.

The plan, which reportedly has been under debate for some time, will mark the first time in a decade that state enterprises have been obliged to pay dividends to the government.

Observers expect the move to help rein in investments at a time when many companies pour their dividends into new projects at the risk of creating huge over-capacity.

It is also likely to boost government coffers as the Chinese state is facing huge obligations due to its ageing population.

Following tax reforms in 1994, large state-owned enterprises have basically ceased to pay dividends to the state.

The arrangement has been the object of occasional criticism, including from the World Bank.

“China faces urgent challenges in refocusing its public spending to improve key services,” the World Bank said in an earlier statement.

“For example, if 50 per cent of (state enterprise) profits ... were distributed to the budget, this would support an 85 per cent increase in government spending on education and health.”—AFP