Many of the giants boosted their coffers through surging price of raw materials The country's biggest state-owned companies posted record profits of more than 600 billion yuan last year, with many riding on the back of surging raw material prices. Li Rongrong, the state-owned Assets Supervision and Administration Commission (Sasac) chairman, said the 169 state-owned firms posted a combined profit of 627.65 billion yuan last year, up 27.9 per cent, Xinhua reported yesterday. Mr Li told a national conference, attended by top management from the biggest state enterprises, yesterday that the asset value of the firms rose 15 per cent last year, to 10.6 trillion yuan. Analysts attributed the higher profits to the near-monopolistic positions of many of the firms in the areas of infrastructure, telecommunications and power generation on the mainland. They include the likes of China Mobile, the biggest mobile phone operator on the mainland, and PetroChina, which operates in an industry closed to private or foreign investment. Many of the state giants are also engaged in the raw materials business and surging domestic demand for such commodities, needed to power the booming economy, has bolstered their profits. The profit increase announced yesterday was much higher than had been forecast. In October, Shanghai Securities News quoted a Sasac official who predicted that the companies' combined profits would hit 560 billion yuan last year. In 2004, they made 488.8 billion yuan. Last week, Mr Li told a forum that state capital would mainly flow to industries and fields related to national security, areas where the market mechanism faced difficulties, and basic industries and services, including infrastructure, raw materials and key technologies he said needed to be controlled by government. As one of the initiatives to restructure the giant state firms, Sasac announced on Sunday that it would lift an earlier ban on management buyouts. It said the change would encourage managers to do a better job. The buyout issue has been a focus of debate on the restructuring of state-owned enterprises, amid fears that permitting the buyouts could lead to the loss of state assets and widespread corruption. The commission and the Ministry of Finance banned such buyouts of Sasac-controlled firms from April, to assuage the public's concerns. The new document places several restrictions on management buyouts. Only managers hired by a company through the labour market - rather than government appointees - and those who have made major contributions to the companies will be entitled to hold a company's shares. The rules also ban executives who plan to buy shares from being involved in policymaking, such as working out reform plans and fixing the prices of state-owned assets. Executives must also provide evidence that their funds were acquired legitimately. There are 138,000 state-owned companies on the mainland, with 169 under the direct administration of the central government commission.