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November 20, 2009

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Slower drop in profit at SOEs

NET profit at China's state-owned enterprises declined at a slower annual pace in the first 10 months of this year, while their revenue reversed a drop and edged up for the first time this year.

Net earnings fell 10.6 percent from a year earlier to 1.06 trillion yuan (US$155.1 billion) through October. The drop narrowed 7 percentage points from the figure in the first three quarters, the Ministry of Finance said yesterday.

This is a contrast with the performance of SOEs in the first two months of this year, when their net profit plunged 45.7 percent from a year ago due to the global financial crisis.

Feng Yuming, an analyst at Orient Securities Co, forecast net profit in SOEs to grow by the year end.

"A rebounding trend has been set," Feng said. "Due to a low base in November and December last year, the profit figure is very likely to become positive this month."

The revenue of SOEs edged up 0.5 percent year on year in the January-October period, the first rise this year thanks to China's easy monetary policy and stronger economic performance. Petrochemical engineering, property development and construction materials businesses led the growth in revenue.

"Chinese SOEs have quickly recovered from the blow of the global recession," said Li Maoyu, an analyst at Changjiang Securities Co. "The fast recovery comes from a huge credit pool provided for their growth and the government's massive stimulus package."

China's gross domestic product grew 8.9 percent annually in the third quarter, faster than the gains of 7.9 percent in the second quarter and 6.1 percent in the first.

The revenue growth in SOEs also echoed a faster rise in China's industrial output, which jumped 16.1 percent year on year in October, the sixth straight month output has grown faster.


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