State-owned enterprises turned around their fortunes last month with the help of Beijing's economic stimulus measures, which pushed their profits higher, according to a top official. State-owned Assets Supervision and Administration Commission (Sasac) chairman Li Rongrong, speaking at a roundtable at the Boao Forum, revealed yesterday that more than 170 companies directly controlled or owned by the central government saw profits grow 26 per cent last month from a year earlier. Earnings were also 86 per cent higher than in February. Revenue was down 5.4 per cent last month year on year, but was 25 per cent higher from a month earlier. Mr Li attributed the marked improvement to the 4 trillion yuan (HK$4.54 trillion) stimulus plan, which helped state companies spanning the banking, telecommunications, petroleum and petrochemicals sectors weather 'a deep winter'. Economists, who drew attention to other macroeconomic indicators, said the higher profitability of state firms added to anecdotal evidence that the worst of the financial crisis might have passed. Last year, profits of state companies tumbled 30 per cent to 665.29 billion yuan from 2007 as the credit crisis swept around the world in the fourth quarter. Analysts believed the banking and oil sectors, the biggest profit contributors to Sasac, led the rebound in profitability among state-owned enterprises. In response to calls for looser credit to arrest fast declining economic growth, banks granted new loans in the first quarter worth 4.58 trillion yuan - 91.6 per cent of Beijing's loan target for this year. 'The sharp jump in loans could be the main factor behind higher profits booked by banks in March,' said Timothy Fung a vice-president of equity research at Credit Suisse Private Banking. 'Addition of bad loans provisions would be far from matching that of new loans.' Mr Fung noted that the property and vehicle sectors also performed better last month, thanks to policies to stimulate sales and easier credit. However, the abnormally high loan growth will likely slow down in the rest of the year, after China Banking Regulatory Commission chairman Liu Mingkang last week warned banks to increase their vigilance in managing the rapid growth of credit, which many analysts say could fuel a rise in non-performing loans. The CBRC would soon issue stricter lending guidelines to banks to ensure proper use of loans, the China Securities Journal reported last week. Another source of March profit growth by state firms could be from the oil producers. Mirae Assets Securities head of China energy research Gordon Kwan said lower crude oil costs and a fuel price surge late last month helped boost PetroChina and China Petroleum & Chemical Corp's oil refining profits. Their crude costs lag behind international spot market prices by one to two months. Meanwhile, Mr Li said that state enterprises should not sack staff amid the economic downturn, and if they decided to cut salaries, they should start with the top management. 'State firms should take actions during the crisis by tightening corporate governance, updating information technology levels and the calibre of management,' Mr Li said. 'They should take a medium to long-term view when forming development strategies.' Most importantly, he said priority should be placed on fluid cash flow. Companies should take up their 'social responsibility', he said. 'Redundancies are part of a company, but the management should be extremely careful in making decisions. In most circumstances, they should refrain from sacking. State firms can lower pay but should not roll any heads,' Mr Li said.