China's Local Governments Hike SOE Profit Contributions to Cover Fiscal Gaps

(CNA, Taipei, 7th) Amid tight fiscal revenues in many parts of China, local governments are increasing the submission ratio of state-owned capital gains to enhance the financial "feedback" from state-owned enterprises (SOEs), freeing up more funds to safeguard and improve people's livelihoods.

Securities Times reported in March of this year that, according to the Ministry of Finance's "Explanation of the 2026 Central State-Owned Capital Operating Budget," the post-tax profit submission ratio for wholly state-owned enterprises (non-financial) in 2026 will be implemented in four categories, with the highest collection rate being 35%, a significant increase from the top submission rate of 25% in 2025.

First Financial reported on June 3 that following the central government's increase in the submission ratio of state-owned capital gains for central SOEs, some provinces have similar plans or have already made corresponding adjustments.

The report stated that recently, 31 provinces have disclosed their fiscal and tax reform work for the "15th Five-Year Plan" period (2026-2030). Guangdong and Jiangxi have explicitly proposed to reasonably increase the submission ratio of state-owned capital gains. Jiangsu proposed dynamic optimization of the submission and allocation ratio of state-owned capital operating income. Hainan proposed to improve the classified submission ratio of state-owned enterprises and to gradually increase the proportion of the state-owned capital operating budget transferred to the general public budget.

In addition, some regions such as Guangxi, Guizhou, and Hunan have already or are steadily increasing the submission ratio of state-owned capital gains.

The report indicated that in recent years, due to China's economic downturn, sluggish real estate and land markets, and low prices, the growth of local government fiscal revenue has been weak. In particular, revenue from land sales has been halved from its peak, while rigid expenditures such as for people's livelihoods and debt interest continue to increase, exacerbating the contradiction between local fiscal revenue and expenditure.

The report mentioned that in the past, reasonably increasing the submission ratio of state-owned capital gains has had an immediate effect on alleviating government fiscal pressure. According to data from the Ministry of Finance of China, after increasing the submission ratio for central SOEs in 2025, the state-owned capital operating budget revenue for central SOEs that year was about 390.3 billion RMB (approximately 1.8 trillion NTD), an annual increase of 73.3%, which filled part of the government's funding gap and made more funds available for areas such as safeguarding and improving people's livelihoods.

However, according to this year's central and local budget reports, affected by the decline in profits of local state-owned enterprises in 2025, the local state-owned capital operating budget revenue at the local level is expected to be about 425 billion RMB in 2026, a year-on-year decrease of 8.5%. Meanwhile, the funds transferred to the local general public budget are estimated to be about 280.5 billion RMB, a decrease of about 16% from last year's executed figure.

Nevertheless, influenced by some local governments' plans to reasonably increase the submission ratio of state-owned capital gains, the actual amount of state-owned capital gains submitted may be better than expected. (Editing: Chen Kai-yu / Lu Jia-rong) 1150607