Centrally-administered SOEs report 2.1% profit rise
January 26, 2021 Category China News Round-up, Weekly
Net profits of China’s 97 centrally administered state-owned enterprises’ (SOEs) were up 2.1% to CNY1.4 trillion in 2020. Nearly 80% reported year-on-year profit growth, Peng Huagang, Spokesperson of the State-owned Assets Supervision and Administration Commission (SASAC) said. However, their total operating revenue was down 2.2% last year to CNY30.3 trillion. SOEs in the automobile, mining, construction, telecoms and steel sectors reported revenue growth. Tian Yun, Vice Director of the Beijing Economic Operation Association, said the combination of surging net profits and declining revenue reflected the adverse impacts of the China-U.S. trade war and the coronavirus pandemic. “Internal structural adjustment at centrally-administered SOEs is another reason. For instance, competition in sectors that allow private enterprises to enter has become more intense,” Tian told the Global Times. The reform of several SOEs in the energy sector has pushed up the prices of commodities, keeping the profits of the SOEs high, despite slightly decreasing total revenue, according to Feng Liguo, Research Fellow at China Minsheng Bank’s research center.
According to SASAC, production and sales of oil, gas, power, steel and coal at centrally-administered SOEs saw steady growth year-on-year in 2020. The cumulative production of crude oil was up 0.6% year-on-year, while coal output grew 4.4% and commercial coal sales were up 6.8%. “The proportion of SOEs in terms of their number and revenue may drop in the future, but they will still play an irreplaceable role in core areas related to national security,” Tian stressed, as reported by the Global Times.
In 2020, China started to implement a three-year action plan for SOE reform and a national fund of CNY 200 billion was established in 2020 to facilitate the mixed-ownership reform of SOEs. By introducing private investors as stakeholders, the reform is expected to optimize corporate governance and enhance operational efficiency. The companies have become more cost effective after the reforms. In 2020, the sales and management costs of the central SOEs saw year-on-year declines. The average debt-to-asset ratio of the central SOEs stood at 64.5% by the end of last year, down 0.5 percentage points from the previous year, the Shanghai Daily adds. China’s state-owned enterprises are subject to negative subsidies from the government budget, Guo Shuqing, Party Secretary of the People’s Bank of China (PBOC) and Chairman of the China Banking and Insurance Regulatory Commission (CBIRC), told the 14th Asian Financial Forum.
China plans to complete more than 70% of the tasks of its three-year (2020-22) action plan by the end of this year, further pushing forward the mixed-ownership reform and reorganization process in its SOEs. China’s Central Committee for Deepening Overall Reform approved the three-year (2020-22) action plan for SOEs in late June. It called for renewed efforts to optimize the structure of the state-owned economy to make it more competitive, innovative, influential and more able to withstand risks.
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