Regulate government subsides

Updated: 2014-11-21 17:28

By Li Yang(

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Governments at various levels must regulate their subsides to State-owned enterprises, says a 21st Century Business Herald article. Excerpts:

According to Xinhua, enterprises listed on the mainland stock market received 32.3 billion yuan ($5 billion) in government subsidies, among which 61.64 percent flowed to 854 State-owned enterprises affiliated to local and central governments, and the subsidy is rising annually.

There are many kinds of subsidies for the SOEs. To stimulate the housing market, governments subsidize banks that loan to house buyers. Governments subsidize enterprises to attract investment but appear frugal when it comes to public services, charity and people’s livelihoods.

Contrarily, some State-run banks and enterprises continuously receive government funds, despite having revenue from their monopoly of certain industries that should have been open to private and foreign companies. Such government subsidies are a root cause of unfairness in the market.

Some local governments increase input to enterprises near bankruptcy to prevent them being expelled from the stock market. Much of the overcapacity in China is caused by blind government subsidies.

The government should not interfere with market operation, but concentrate its resources to provide better public services.

The more subsides and low-tax policies the enterprises enjoy, the more money government finance losses. The subsidy system should abide by the law and be put within the budget under the scrutiny of the public and relevant watchdogs.

Every penny spent should have clear purpose for local people and the economy. The decision-makers should be taken to task for failure.