Rising costs hit profits at state-owned firms in first quarter

PUBLISHED : Thursday, 21 April, 2011, 12:00am
UPDATED : Thursday, 21 April, 2011, 12:00am


Profit growth among the mainland's major state-owned companies slowed in the first quarter as rising costs, austerity measures and a tightening of bank lending continued to affect the nation's industrial giants.

The state-owned Assets Supervision and Administration Commission (Sasac) reported yesterday that the state companies under its direct oversight posted a total net profit of 208.6 billion yuan (HK$248 billion), up 22.4 per cent year on year. That percentage increase slowed from a 40.2 per cent jump for all of last year.

Sasac did not provide explanations on the first-quarter figures.

The 120-odd state-owned companies, the mainland's largest industrial conglomerates, reported revenue of 4.45 trillion yuan in the first three months of this year, a year-on-year increase of 25.7 per cent.

'Stubborn inflation is still the biggest enemy to the economy,' said Lu Ming, a professor of economics at Fudan University. 'The profit outlook for the mainland's companies remains cloudy now that China is facing hard-landing risks.'

The major state firms all enjoy monopolies in their sectors, and economic analysts said most of them could easily generate profits with the support of the central government.

The performance of major state-owned companies has always been in the spotlight, and poor results by the industrial juggernauts generally lead to a chorus of public criticism on their inefficient management.

The results, which provide a snapshot of the country's overall economic situation, are likely to have been affected by government policies. Beijing started to tighten monetary policy to tame inflation last year. The nation's top economic policymakers and local governments have also rolled out austerity measures to cool the red-hot property industry.

Consumer inflation jumped 5.4 per cent in March, hitting a 32-month high. And the producer price index climbed 7.3 per cent last month.

China's gross domestic product grew 9.7 per cent in the first quarter.

The state-owned companies are normally granted the lion's share of massive government-orchestrated projects. They were among the top beneficiaries of a 4 trillion yuan stimulus package announced by Beijing in late 2008 when the government accelerated infrastructure projects to combat the global slowdown.

Privately owned and foreign-funded businesses generally are not able to compete with their state-owned rivals.

Last year, the roughly 120 state-owned companies paid a combined 1.4 trillion yuan in taxes, accounting for nearly one-fifth the national total.

Falling fortunes

State-owned firms reported revenue of 4.45 trillion yuan in the first quarter, up this much year on year: 25%