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SOEs report slower growth in profits
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STATE-OWNED enterprises saw slower growth in profits in the first eight months against the backdrop of China’s decision to curb SOE executives’ salaries while the country battles an economic slowdown.
Profits at SOEs expanded 8 percent from a year earlier to 1.64 trillion yuan (US$267 billion) in the January-August period, the Ministry of Finance said yesterday. The pace compared with a 9.2 percent gain in the first seven months.
Profits at centrally administered SOEs gained 8.6 percent in the year to August, and those managed by local government rose 6.3 percent. Together, their revenue added 5.5 percent to 31.2 trillion yuan, and they paid 2.5 trillion yuan in taxes, up 7.3 percent from a year ago.
“China’s recent economic slowdown is having a strong impact on the profit-making capability of SOEs,” said Xue Jun, an economist at CITIC Securities Co. “Also, rising costs are eroding SOE profits.”
Major indicators pointed to a further slowdown in China’s economy in August. Industrial output in the month grew just 6.9 percent year on year, down from 9 percent in July and was its lowest level since the 2008 global financial crisis.
Zhou Hao, an economist at Australia & New Zealand Banking Group, said China may miss its growth target of 7.5 percent this year if easing policies are not launched because past experience suggests China needs to maintain about 9 percent industrial production expansion to deliver the targeted economic growth.
China’s SOEs are also under stricter scrutiny as reforms to develop a mixed ownership, introduce modern corporate structure and improve state-owned assets take hold.
In August, China decided to cut “excessive” salaries of SOE executives. Ceilings have been set on SOE executives’ expense accounts and bans placed on their official vehicles, offices, training, business receptions, domestic and overseas business trips and communications.
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