SOEs report rising profits, revenues in January-July period

China’s State-owned enterprises saw a 23.1 percent increase in profits year-on-year from January to July, the Ministry of Finance said in a statement on Thursday.

SOEs have registered an uptick in revenues during the first seven months, as well. The total revenue generated by SOEs topped 28.9 trillion yuan ($4.3 trillion), up 16.5 percent year-on-year. Of that total, central SOEs contributed 17.2 trillion yuan, up 15.1 percent and the local ones generated 11.7 trillion yuan, up 18.7 percent.

The ministry said in the statement that the SOE profits have grown at “steady and relatively fast” rates, noting that profits were 6.6 percentage points higher than that of revenues.

The profit growth of SOEs in the January-July period is largely at the same level as that of the first six months, which was 24.3 percent.

The local SOEs achieved a 35.8 percent growth in profits, totaling 575 billion yuan, while the central SOEs made a profit of nearly 1.1 trillion yuan, up 17.3 percent. Total profits reached 1.6 trillion yuan.

The operational costs of SOEs saw a lift in the past seven months, up by 15.8 percent, mounting to 28 trillion yuan. Of that total, sales, managerial and financial costs accounted for 10.5 percent, 6.2 percent and 9.3 percent, respectively.

The ministry also pointed out that loss-making industries last year, such as steel and non-ferrous metals, have seen a pickup of growth momentum since the start of this year. Other industries such as coal, petroleum and petrochemical and transportation have also seen a sharp increase in profit as the country presses ahead with its supply-side structural reform, which has led to reduction of excessive production capacities in such sectors as steel and non-ferrous metals.

Liu Yanqi, an analyst from Haitong Securities specializing in steel industry, said the sector will continue to show promising growth as the country’s environmental protection moves and cold weather in the coming winter may limit production and further push up prices.

“Profits have remained promising, thanks to the supply-side structural reform,” Liu said. “The policy plays an important role in increasing profits and the price of the sector.”

Xu Bin, industrial and infrastructure analyst in UBS Securities, also said that transportation, especially the railway sector, will have strong prospects in following years as more rail lines are built.

“During the 13th Five-Year Plan period (2016-20), railway investment is expected to reach 800 billion yuan, and drops to 750 billion yuan in the following five years,” Xu said. “I think it is a considerably minor drop; we still have many railways to build.”