State firms rebound, risk control a priority

Cost-cutting has helped improve the returns of state-owned enterprises, says Mr Xiao.
Cost-cutting has helped improve the returns of state-owned enterprises, says Mr Xiao.

State-owned enterprises (SOEs) controlled by the central government have seen profits rebound strongly since the start of the year, a senior government official said, indicating that the Chinese economy has stabilised.

But Mr Xiao Yaqing, head of the state assets regulator, stressed that controlling risks remains a key priority for its work this year.

The high level of SOE indebtedness is widely seen as one of the biggest potential risks to the Chinese economy. Since the global financial crisis in 2008, the debts have been ballooning while profits have been shrinking. Analysts have said that rising SOE debt could trigger state support and have spillover effects on the banking sector, setting in motion a financial crisis.

"Reforms are meant to tackle the problems head on. We will prioritise reforms in areas that are most problematic... In 2017, we need to increase our grip on controlling risks," Mr Xiao said yesterday at a press conference on the sidelines of the annual parliamentary session.

He said the profits of central government-controlled SOEs rose 29.1 per cent from a year earlier to 168.59 billion yuan (S$34.6 billion) in the first two months of this year. Progress made in cost-cutting has helped improve returns, he added.

According to a briefing note issued by the State-owned Assets Supervision and Administration Commission (SASAC) yesterday, management fees and labour costs have been cut by 4.9 billion and 7.6 billion yuan, respectively.

China will continue to deepen the restructuring of centrally controlled SOEs, with a focus on the steel, coal, heavy equipment and coal-fired power sectors, said Mr Xiao. He also gave the assurance that getting retrenched workers re-employed will remain a priority in the restructuring process.

On the issue of mixed ownership reforms, Mr Xiao emphasised that not all SOEs will be open for investments by private enterprises. "Some will be under mixed ownership, some will be in the form of holding companies and some will be 100 per cent state-owned," he said. "Mixed ownership is not a panacea (for all problems faced by SOEs)."

A version of this article appeared in the print edition of The Straits Times on March 10, 2017, with the headline 'State firms rebound, risk control a priority'. Print Edition | Subscribe