Central SOEs leaner, stronger
Firms report better performance following reforms
China’s centrally administered Stateowned enterprises (SOEs) have seen both an increase in assets and improved quality of their growth during the past five years, the country’s State assets watchdog said Thursday, weeks before a key Party meeting scheduled for mid-October.
Experts said that in the past five years, reforms in central SOEs have made progress while maintaining stability.
Great achievement
As of the end of 2016, the assets owned by China’s central SOEs topped 50.5 trillion yuan ($7.59 trillion), a leap of 80 percent compared with the end of 2012, Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), told a press conference in Beijing.
During the period, the combined revenue posted by central SOEs increased 30.6 percent to 6.4 trillion yuan, Xiao said, adding that taxes and fees handed to the central government by these firms totaled 10.3 trillion yuan, up 63.5 percent from the previous fiveyear period.
In the first eight months of this year, central SOEs reported a rise in revenue of 15.7 percent year-on-year and profit growth of 17.3 percent, and both these figures are record-setting increases, noted Xiao.
There has also been notable scientific and technological progress in a wide range of sectors, including manned space missions, high-speed railways, large commercial airplanes, satellite navigation and nuclear energy, according to Huang Danhua, vice chairperson at SASAC.
Central SOEs continue to invest heavily in research and development, having spent 1.7 trillion yuan in the five years since 2013, accounting for one quarter of the national total, Huang said.
“In the central SOE reforms, a general adoption of market principles has been completed. Value chains have been expanded, enhanced and optimized,” said Zhang Chunxiao, professor of economics at Peking University. “With the Belt and Road (B&R) initiative being carried out, more SOEs are going global, improving their competitive capabilities in the international market.”
Wang Jiang, director of the Beijing-based Central SOEs Think-tank Alliance, told the Global Times that the modern corporation system is one of the big changes among SOEs, allowing the enterprises to develop in an appropriate manner and achieve better profits.
Supply-side structural reform
The central SOEs have been actively engaged in the campaign to cut excess capacity, according to Xiao. In 2016, central SOEs in the steel sector shed about 80 percent of their overcapacity, Xiao noted.
Central SOEs also dealt with 500 “zombie firms,” or chronically lossmaking companies, in a targeted campaign, reducing annual losses by 88.5 billion yuan, Xiao said.
At the end of August, the average debt ratio of central SOEs stood at 66.5 percent. At the end of 2016, the figure was 66.7 percent, up 0.4 percentage points from that of 2012, according to Xiao.
“Due to legacy reasons, central SOEs had insufficient capital, so the leverage rate was relatively high. Nowadays, we can see the debt ratio dropping. However, more work needs to be carried out in deleveraging,” Wang said.
“Deepening supply-side structural reform will help SOEs, and ultimately enterprises will be able to monitor and control risks for themselves,” Wang noted.
More innovation needed
During the past five years, there have been mergers involving 34 central SOEs, with notable tie-ups creating leading train maker CRRC Corp, steel maker China Baowu Steel Group Corp and shipping company China COSCO Shipping Corp.
As a result, the number of central SOEs has been trimmed from 115 in 2013 to 98.
In pioneering mixed-ownership reform, another effort to increase the competitiveness of the State-owned sector, as much as 68.9 percent of central SOEs have undergone mixed-ownership reforms.
Zhang told the Global Times that more measures should be taken to reorganize the SOEs. “Central enterprises should be more innovative in their development, market strategy and products.”
“For instance, more SOEs are investing in the B&R route. These enterprises are innovative enough to tap into resources around the world. This means the real economy is growing fast,” Zhang noted.
With regard to mixed-ownership reform, Zhang said it could work in two ways.
“On the one hand, private capital should be welcomed into SOEs, and on the other, SOEs can invest in private companies,” Zhang said.
“In the central SOE reforms, a general adoption of market principles has been completed. Value chains have been expanded, enhanced and optimized.” Zhang Chunxiao, Professor of economics at Peking University