Chinese state enterprises post record level of profits in 2017
Highest total earnings for state firms posted last year, according to Communist Party newspaper the People’s Daily
Total profit at enterprises owned by China’s central government rose 15.2 per cent in 2017 to 1.4 trillion yuan (US$217.5 billion), state media reported, citing figures released at a government conference.
The total profit was the highest ever, the Communist Party newspaper People’s Daily said, while the rate of growth was the highest in five years, according to state-run news agency Xinhua.
The profit figures vindicate plans the Chinese government announced in 2015 to overhaul its lumbering and debt-ridden state sector, launching a radical reform programme designed to make state-owned enterprises (SOEs) more profitable and responsive to the market.
Xinhua said operating revenue for central government-owned enterprises rose 13.3 per cent last year to 26.4 trillion yuan. Total assets reached 54.5 trillion yuan by the end of last year, People’s Daily said, an increase of 7.9 per cent versus 2016.
China has already cut the number of enterprises administered by the central government to 98 from 117 in 2012 through a series of high-profile mergers and acquisitions.
The remaining state-owned companies have been under pressure to improve their management to attract private capital.
Reforms to promote mixed ownership in sectors such as power, oil, gas, shipping and telecommunications led to the injection of more than 90 billion yuan of private capital in 2017, the Shanghai Securities News reported on Tuesday, citing the same meeting on Monday.
But state-run firms have also benefited from the upturn in a number of major industrial sectors over the last year, as well as a campaign to shut down loss-making “zombie” enterprises and tackle excess capacity in areas such as steel and coal.
People’s Daily reported on Tuesday that China’s central government SOEs met their target of shutting down 1,200 zombie enterprises by the end of last year.
State-owned businesses will target coal capacity cuts of 12.65 million tonnes in 2018 and will also aim to reduce excess capacity at companies involved in coal-fired power, non-ferrous metals, shipbuilding and construction materials.
China’s SOEs are expected to accelerate reform of their ownership structures this year, but officials have made it clear that the role of the Communist Party will be strengthened to ensure such companies continue to implement state strategies at home and overseas.
Chua Han Teng, head of Asia Country Risk at BMI Research, said that while political concerns about “social stability” could prevent any aggressive new reform push, the overhaul in ownership structures among SOEs had remained “more profit-driven rather than policy-driven”.
“Overall, a faster pace of reform is likely to improve the long-term efficiency and performance of SOEs and reduce the misallocation of resources in the economy,” he added.