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BEIJING, Feb. 9 -- China's state-owned enterprises (SOEs) have been told to seek profitability by limiting salary raises for underperformers, the state-assets authority said Monday.

SOEs under the supervision of China's State-owned Asset Supervision and Administration Commission (SASAC) will set basic gross profit and value added targets this year. Another target, 15 percent higher, will be used to judge their performance, according to an announcement by SACAC.

Enterprises which set much lower targets than in previous years will be automatically rated "mediocre" and no increase in total salary bill will be allowed.

China is transforming the state sector to make it more competitive through mixed ownership and better management.