SOEs told to fo­cus on core, shed side work

China Daily (Canada) - - FRONT PAGE - By HU YONGQI in Bei­jing huy­ongqi@chi­nadaily.com.cn

State-owned en­ter­prises di­rectly ad­min­is­tered by the cen­tral gov­ern­ment are be­ing urged to strip off side­line op­er­a­tions that dis­tract from the fo­cus on core busi­nesses.

These en­ter­prises, also known as cen­tral SOEs, are ex­pected to achieve more than 100 bil­lion yuan ($15.3 bil­lion) in ad­di­tional prof­its by the end of 2017 through re­duc­ing costs and im­prov­ing ef­fi­ciency.

The de­ci­sion to deepen SOE re­form as well as im­prove the qual­ity and prof­itabil­ity of these com­pa­nies was made on Wed­nes­day at an ex­ec­u­tive meet­ing of the State Coun­cil that was presided over by Premier Li Ke­qiang.

The meet­ing ad­dressed 106 cen­tral SOEs, which are those gov­erned by the State-Owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion.

The Min­istry of Fi­nance said cen­tral SOEs had 6.14 tril­lion yuan in rev­enue from Jan­uary to March for a net profit of 339 bil­lion yuan, a de­crease of 13.2 per­cent year-on-year.

The stock prices of 28 cen­tral SOEs go­ing pub­lic surged on Wed­nes­day, as the Shang­hai Com­pos­ite In­dex dropped by 1.27 per­cent.

“Cen­tral SOEs have played an in­dis­pens­able role in China’s so­cial and eco­nomic de­vel­op­ment,” Li said.

Cen­tral SOEs must strengthen cost man­age­ment as well as trim re­ceiv­ables, in­ven­to­ries and fi­nan­cial losses, in ad­di­tion to cut­ting debts, said a state­ment re­leased af­ter the meet­ing.

These en­ter­prises were urged to in­crease com­pet­i­tive­ness by for­ti­fy­ing their core busi­nesses and re­mov­ing side­line busi­nesses in the next two years.

The cen­tral gov­ern­ment plans to cut 10 per­cent of ex­cess ca­pac­ity for cen­tral SOEs in the coal, iron and steel sec­tors this year and in 2017. These SOEs are also re­quired to re­duce man­age­ment hi­er­ar­chy by half and strip off 20 per­cent of their sub­sidiary le­gal en­ti­ties within three years.

Zhang Chunx­iao, a re­searcher at the Chi­nese Academy of Gov­er­nance, said all the mea­sures were part of sup­ply-side re­form. “Cen­tral SOEs can only boost prof­its when they fo­cus on core busi­nesses with less costs in man­age­ment and pro­duc­tion pro­cesses.”

Huang Qun­hui, di­rec­tor of the In­sti­tute of In­dus­trial Eco­nom­ics at the Chi­nese Academy of So­cial Sciences, said, “The tar­get can be re­al­ized, since most of the cen­tral SOEs can ob­tain high prof­its, if all the mea­sures are prop­erly im­ple­mented.”

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