After China's central government raised the proportion of after-tax profits that State-owned enterprises must remit to the State, a growing number of provinces are following suit, aiming to ease widening fiscal revenue-expenditure gaps and free up more funds for social welfare and livelihood programs.

The moves come as local governments face mounting fiscal pressures from a protracted property downturn, weak land sales and rising mandatory spending on pensions, healthcare and debt servicing, and tapping SOE profits has become an increasingly important lever, experts said.

The provinces of Guangdong, Jiangxi, Jiangsu and Hainan have all signaled in their recently released 15th Five-Year Plan (2026-30) outlines that they will "reasonably raise" profit remittance ratios of local SOEs, and/or dynamically optimize collection rates.

Localities such as the provinces of Guizhou and Hunan, as well as the Guangxi Zhuang autonomous region, have already steadily increased their own ratios.

China launched its State capital operations budget in 2008, requiring wholly State-owned enterprises to hand over a portion of their after-tax profits. The rates have been raised several times since.

"Revenue growth has slowed in recent years, but mandatory spending has continued to climb. Increasing the share of SOE profits handed over to the State directly boosts funds available to bridge the gap between income and expenditure, which is the most immediate driver," said Luo Zhiheng, chief economist at Yuekai Securities.

Luo said State capital returns had been locked up within individual enterprises, making it hard to create coordinated policy. By centralizing those funds, the government can channel resources into priority areas such as major national initiatives, technological innovation, social programs and risk management.

At the central level, the top rate for tobacco producers and resource-based firms — which account for the lion's share of central government revenue from State capital operations — now stands at 35 percent, up from 20 percent in 2014.

For local governments, rates vary but are also trending upward. Jilin province, for example, lifted its base rate from 20 percent to 30 percent in 2020. Guangxi set a 35 percent rate for financial and resource enterprises and 30 percent for others starting in 2025.

"The general direction is a moderate increase, with rates differentiated by industry and region. Financial and resource firms typically pay more, while public-welfare enterprises pay less or may be temporarily exempted to encourage long-term investment," said Li Yan, a professor at Central University of Finance and Economics.

The impact on government coffers has been immediate. At the central level, after Beijing raised remittance rates in 2025, State capital operational revenue jumped 73.3 percent year-on-year to 390.3 billion yuan ($57.6 billion), far exceeding the budgeted figure, said the Ministry of Finance.

That allowed the central government to transfer 240 billion yuan into the general public budget — a record amount — to fund social welfare, education and infrastructure, the ministry said.

At the local level, State capital operational revenue rose from about 94.7 billion yuan in 2015 to 464.4 billion yuan in 2025, a nearly fivefold increase. Transfers from the State capital budget to the general public budget also expanded, reaching 334.1 billion yuan last year.

"Raising remittance rates and expanding coverage could help local governments narrow their fiscal gaps and better reflect the public nature of State capital," said Deng Shulian, a professor at Shanghai University of Finance and Economics.

Experts caution against a one-size-fits-all hike.

"The increase should be moderate, differentiated by sector and enterprise type, and be periodically reviewed based on industry conditions, profitability and fiscal needs," Deng said.

wangkeju@chinadaily.com.cn