China's state-owned enterprises are expected to record profits of over one trillion yuan (125 billion US dollars) after tax in 2006, reports the State-owned Assets Supervision and Administration Commission of the State Council (SASAC).

Central SOEs will contribute 700 billion yuan of the total and the remaining 300 billion yuan will come from local state firms, said Li Baomin, official with SASAC.

SOE profits have been on the increase in recent years, with profits in 2005 surging 25 percent from the previous year to 904.7 billion yuan.

Debate has heated up over who should manage the hefty SOE profits, which have been in the hands of the SOEs since the taxation reform in 1994.

The government is working on a new accounting system, which will allow the state to share the profits of the SOEs.

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