The popular perception of ailing Chinese state-owned enterprises (SOEs) may be misplaced, with dismal official figures not telling the whole truth, Standard Chartered Bank research suggests. Officially, China's industrial SOEs reported a 37.1 per cent fall in after-tax profits last year, up from 19.7 per cent in 1995. The proportion of loss-making SOEs to the total was 37.7 per cent last year, and the number of workers sent home rose to more than 10 million, which would have taken China's urban unemployment rate to about 9 per cent, versus the official rate of 3 per cent. 'While performance of China's SOEs is dissatisfactory, they are not as bad as some statistics suggest and as many people may believe,' the bank said in a report released yesterday. It said the benchmark of after-tax profits was not a good indicator of the overall performance of China's SOEs as they did not fully reflect the contribution they made to the state and welfare of their workers. Instead, the bank used the so-called 'sales value-added' index, which is calculated by deducting from total sales of SOEs the costs of intermediate inputs and other operational costs minus labour costs. The index shows that the contribution to the economy by the SOEs grew by 11.5 per cent in nominal terms and 5.1 per cent in real terms last year. The bank said the difference between the growth of sales value-added and the profit falls of SOEs stemmed from China's peculiar national income distribution system. 'The SOEs are over-taxed in the sense that their tax contribution is disproportionate to their share of the economy,' the report said. It said state firms were also under-capitalised and would have to rely on bank loans, thus incurring a high level of interest payments, and would have to bear a heavier burden in workers' welfare. The bank said 5.34 million of those workers sent home in 1996 were re-employed soon after; the remainder were paid a proportion of their salaries by the firms.