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SCMP Reporter

MANY Chinese listed companies are producing dismal returns on their shareholders funds, according to a study into corporate performance.

The report, comparing the returns on net assets of listed companies in Shanghai and Shenzhen, showed most produced results which failed to keep pace with inflation.

The comparison by China Financial Times - which is published by the People's Bank of China and the four state banks - was based on the companies' financial statements for the year to December 31 1994, the latest data available, according to the newspaper.

Only 10 or 3.39 per cent of the 295 listed companies were able to produce returns exceeding 30 per cent.

A total of 256 or 87 per cent of the companies had returns ranging from losses to below 20 per cent.

A profit of 20 per cent resulted in a loss once inflation was taken into account.

China's official inflation rate was 24.1 per cent last year, but private economists said it was closer to 30 per cent.

  The top performers were Sichuan Changhong Electric Co, with a return of 41.4 per cent, and Jiangsu Chunlan Refrigerating Equipment, with 37.3 per cent.

  Other good performers included Shaanxi Guotuo Co, Shenzhen Konka Electronic (Group), Shanghai Lujiazui Finance and Trade Zone, Shanghai Jinqiao Export Processing Zone, and Shenzhen Fitya Holdings.

  Another 29 companies or 9.83 per cent gave their shareholders a return of 20 to 29 per cent. Only 13 per cent of the listed companies achieved returns of at least 20 per cent.

   Analysts said the performances showed that listed firms still had a long way to go before becoming more efficient and profitable.

  The results confirmed analysts concerns that many Chinese companies failed to realise that taking money from the public meant putting its funds to effective use.

  Most listed companies were formerly state enterprises that did not have to produce a record of profit before flotation.

  The lack of concern about profits continued after the companies went public, analysts said.

  Most companies returns were below inflation, indicating that there was a decline in the real value of their funds.

 A total 170 companies posted returns of 10 to 19 per cent, and 84 with returns of under 10 per cent. Two companies lost money.

    They said investor confidence in stock markets would continue to dip if the trend continued.

  'Share prices are a reflection of the companies' strength and performance,' one analyst said.

 'Why invest in listed companies if they can't do better than savings deposits?'.

  The China Financial Times report said the securities authorities should apply stringent standards on state enterprises seeking a public flotation.

  There could, for instance, be a listing requirement that allows only company's able to produce a return of at least 15 per cent in the three years prior to flotation to list.

   Analysts said that if companies were unable to improve their performance after going public, it would set back the official push for state enterprises to be responsible for their own bottom line by forming joint stock companies.



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Listed companies perform poorly