State-owned enterprises (SOEs) with high debt burdens, tight cash flows and poor cost management records have been asked by the state assets watchdog to improve their risk and cost management amid turbulent economic times. SOEs with high debt ratios and a propensity to invest would be asked to 'reasonably control' their investment scale and cut debt, Xinhua quoted Huang Shuhe, a vice-director of the State-owned Assets Supervision and Administration Commission (Sasac), as saying. Yardsticks for improvement, including debt-asset ratio and liquid assets-current liabilities ratio, will be tightened to achieve the desired effect. The degree of tightening will vary for different industries. 'SOE performance assessment should be done in a way that leads them to enhance risk management,' Mr Huang said. Specifically, SOEs with debt-asset ratios of more than 70 per cent will be asked to cut the ratio as part of their annual performance appraisal. Their return on net asset performance will also be considered separately from those with lower debt ratios. Companies with high debt leverage tend to outperform those with lower debt in terms of returns on asset during boom times as they can do more business with borrowed funds. Central government-administered SOEs are given grades for their annual performance by Sasac, to which their bosses' promotion and bonuses are hinged upon, in theory. In addition to debt ratio, Sasac will also raise the performance benchmark for companies with tight cash flow and poor cost management, to steer them to improve operations, Mr Huang said, without giving details. Analysts said Sasac's gesture was aimed at ensuring stability in corporate development on the mainland amid limited prospects for a turnaround in the global economy. 'I think the message to the large SOE bosses is that they should seek stability as a first priority and not to engage in risky investments hastily,' said Credit Suisse Private Banking vice-president of equity research, Timothy Fung. State firms such as China Investment Corp, Aluminum Corp of China and Ping An Insurance (Group) have incurred huge paper losses on overseas investments made in the past two years due to the global financial turmoil. The stability theme was also echoed at the macroeconomic level in Premier Wen Jiabao's remarks in the World Economic Forum in Davos, Switzerland. He said Beijing had set an 8 per cent target for this year's economic growth to maintain social stability.