State firms post better profits as recovery builds
Toh Han Shih
Mainland state-controlled firms' profit and revenues continued to improve last month as they recover from the global economic crisis.
The year-on-year growth rate for revenue at state-controlled firms rose to 3.7 per cent in the first 11 months of this year, the Ministry of Finance said yesterday.
That was in marked contrast to the minus 8.1 per cent rate registered in the first two months of this year. For the first 10 months, revenue grew 0.5 per cent.
The year-on-year growth rate for gross profit at state-controlled firms in the first 11 months this year was minus 1.9 per cent, which is an improvement from the minus 10.6 per cent in the first 10 months and minus 43.7 per cent in the first two months, the finance ministry said.
'The improvement is likely to continue next year because of the recovery in China's economy and commodity prices,' said Tao Dong, the chief regional economist for Asia excluding Japan at Credit Suisse. 'We will see a normalisation of profit.
'The bad news is the world economy is in a fragile recovery, and China is exposed to this.'
One worry was the risk of non-performing loans from the huge financing of mainland infrastructure projects, which would be a concern longer term, said Tao.
'Up till April 2010, Chinese firms will see good improvement, but we must wait and see what happens after April,' said Sinopac Securities analyst Jack Xu.
One reason next year's first quarter would show strong growth from the first quarter of this year was the base effect, because the mainland's economy was hard hit by the global financial crisis in the first quarter of this year, Xu said.
The economy started recovering in April, so the corresponding year-on-year growth next year might not be so strong, he added.
Many mainland banks were expected to announce a need for additional capital in April next year, which might hurt the lenders' share prices, said Xu.
The revenue of state-controlled firms in November rose 9.6 per cent from October, and their revenue totalled 20.14 trillion yuan (HK$22.88 trillion) in the first 11 months, the finance ministry said.
Although the gross profits of state-controlled companies dropped 1.9 per cent to 1.19 trillion yuan in the first 11 months, combined gross profit rose 0.8 per cent last month from October.
The industries that recorded large increases in profit in the first 11 months include the petrochemical, automotive, property construction and building material sectors.
The electricity and rail transportation sectors saw a significant reduction in losses.
The industries that saw a lessening in the severity of their profit drop in the period include oil, steel, coal and nonferrous metals.
The electronics and machinery sectors enjoyed an increase in profits in the first 11 months while tobacco profits dropped.