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SOE profits decline in January-April

By Wang Bo (China Daily)
Updated: 2009-05-21 08:18

Customers walk past a China Telecom sign at one of the State-owned company's service centers in Shanghai. [Bloomberg News]

Profits of China's State-owned enterprises (SOE) continued to fall in the first four months of the year, albeit at a slower pace, as the nation's giant stimulus package started to take effect.

From January to April, the combined profits of China's SOEs totaled 323.6 billion yuan ($47.41 billion), down 32.3 percent from a year earlier, compared with the 36.8 percent decline in the first three months, the Ministry of Finance (MOF) said yesterday in a statement on its website.

Enterprises controlled by the central government posted profits of 260 billion yuan through April, down 24.7 percent year-on-year. The combined profits of SOEs controlled by provincial and other local governments plunged 52 percent in the same period to 63.6 billion yuan, the MOF said.

Related readings:  SOEs' operating revenue down 7.3% in first four months  Chinese Vice Premier urges SOEs to contribute to growth  SOEs profit surge fuels call for fair distribution  Central SOEs saw recovery in March

Meanwhile, the aggregate sales for the period dropped 7.3 percent from a year ago to 5.98 trillion yuan, slightly better than the 7.6 percent fall from January through March.

"Though sales and profits of State-owned firms continued to fall, the pace of profit decline has moderated markedly," MOF said.

SOEs saw combined profits declining since last August as the global financial crisis worsened. After falling 43.7 percent in the first two months of 2009, SOE profits have recently somewhat stabilized, which economists said was largely due to the traction they gained from the 4-trillion-yuan stimulus package.

"The huge fiscal stimulus has spurred demand for products of State-owned firms, especially those in the upstream of the industrial chain," Shen Minggao, chief economist with the Chinese Caijing magazine said.

The ministry said corporate profits in sectors, such as construction and real estate, have maintained their uptrend, in line with the recent strong rebound in the property market in some major cities.

Companies in petrochemical, equipment and automobile industries saw their profits falling at a slower pace, while those in steelmaking and shipping sectors were still running in a loss, the ministry said.

China's economy has showed signs of recovery with the help of the galloping bank loan growth. But analysts said given the gloomy overseas demand and lackluster domestic private investment, the prospects for SOEs in the near future is not that optimistic.

As many SOEs are grappling with the problem of industrial overcapacity, their profitability could be affected when external demand showed no signs of a recovery, Shen said.

On the other hand, private investment is yet to pick up, he said.

Zuo Xiaolei, chief economist, Galaxy Securities, said it would be better not to make any hasty judgment based on the minor changes in monthly figures.

"The deceleration in SOE profits has largely been due to the government stimulus. This is hardly a signal of an economic turnaround," said Zuo.