Cen­tral SOEs leaner, stronger

Firms re­port bet­ter per­for­mance fol­low­ing re­forms

Global Times - - Front Page - By Chu Daye and Dong Feng

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

Photo: VCG

An em­ployee works at a steel plant in Huaibei, East China’s An­hui Prov­ince in 2016.

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