Regulator cuts profit growth target for SOEs to 5 pct

China's State assets regulator has cut the annual profit growth target for State-owned enterprises (SOEs) by half this year, media reported Sunday, a sign underlining the pressure from a slowing economy on what are usually the most profitable enterprises in China.

The State-owned Assets Supervision and Administration Commission (SASAC) has slashed the annual profit growth target of SOEs administered by the central government to 5 percent year-on-year in 2014 from 10 percent in 2013, the Economic Observer reported Sunday, citing an unidentified source from SASAC.

The source also said the 5 percent target is the bottom line and SASAC hopes the central SOEs could strive to achieve a 6 percent growth in profit in 2014, according to the report.

In 2013, the net profit of central SOEs grew 3.7 percent year-on-year to reach 1.17 trillion yuan ($187 billion).

Despite the cut, some central SOEs still feel the new target is not easy to achieve, the report said.

Nearly two-thirds of the central SOEs suffered overcapacity, as well as chain debts and high inventory.

The operation of these enterprises is currently poor, an executive of a central SOE was quoted by the report as saying.

Profits of central SOEs gained 6.9 percent year-on-year to reach 576 billion yuan in the first four months of the year, official data showed earlier this month. The data also showed profits in SOEs in the construction material, automobile and real estate industries posted big growth while those in iron and steel and non-ferrous metal industries continued to decline. Sun Jin, director of the press office at Wuhan Iron and Steel (Group) Corp, a central SOE, told the Global Times on Sunday that the company has not received any news about the cut.

The steel sector has remained sluggish in recent years. It is uncertain whether the group could achieve a 5 percent growth in profit this year as the performance will depend on the overall condition of the macroeconomy, Sun said.

Sunday's report also came after the Ministry of Finance announced earlier this month it would raise the ratio of profit handed over by the central SOEs by 5 percentage points this year.

"China's economy was previously driven by investment. As the government pledges to restructure the economy away from investment, sectors whose growth relies heavily on investment will undoubtedly suffer great loss," Xu Baoli, director of the Research Department of SASAC Research Center, told the Global Times on Sunday.

"It is urgent to speed up SOE reforms, especially the mixed ownership reform, to improve the sustainable growth and efficiency of SOEs," Xu said.

In a positive sign of SOE reform, China Telecom, one of the country's three State-owned telecom operators, said on May 13 it planned to choose two or three subsidiaries to trial a mixed-ownership structure in 2014.

This followed a report on May 12 that PetroChina announced a plan to sell off equity from a new pipeline to introduce private investment.