SOEs report improved performance

Economic slowdown continues to affect some industries

State-owned enterprises (SOEs) saw improved performance for the first half of the year, though some of them were still struggling with falling profits and losses, official data showed on Thursday.

About one-third of the central government administered enterprises and half of the local SOEs either saw their profits drop or incurred losses in the first half of this year, the Ministry of Finance (MOF) said in a statement posted on its website.

Revenues of all SOEs totaled 23.3 trillion yuan ($3.78 trillion) or nearly 87 percent of China's GDP in the January to June period, up 5.9 percent year-on-year, up 0.6 percentage points from the first quarter of this year.

Overall SOE profits grew 8.9 percent in the first six months from a year earlier, faster than the 6.9 percent growth in the January to May period.

Industry-wise, transportation, auto, and construction materials saw substantial increase in profits, and coal mining, chemical and textiles industries posted dramatic fall in profits, while nonferrous metals industry continued to be in red.

Slowing economic growth caused the drop in profits and even losses of the SOEs, said Zhang Yingjie, deputy general manager of R&D department of China Chengxin International Credit Rating.

Given their large size, the SOEs were especially hit hard amid China's efforts to restructure its economy given their large size, to transform to quality-driven growth, and to redress the overcapacity issues, Zhang told the Global Times on Thursday.

China recorded a GDP growth of 7.5 percent in the second quarter of this year, regaining some steam from the first quarter, official statistics showed on Wednesday.

As the transformation moves forward, the downward pressure on the economy will continue to weigh on firms which have lower productivity and efficiency, Zhang said.

China's State assets watchdog announced a pilot program on Tuesday covering six SOEs including the State Development & Investment Corp and China National Cereals, Oils and Foodstuffs Corp to reform their ownership and management by introducing private capital.

The move is regarded as a concrete step toward SOE reform through mixed ownership, to improve the efficiency of SOEs, vitalize the private sector and release market power.

"Reform is more likely for SOEs in market-oriented sectors facing structural challenges such as softening demand and persistent capacity surpluses," Fitch Ratings said in a research note e-mailed the Global Times on Thursday.

Reform measures including privatizations and asset sales could bring quick economic benefits for them with the proceeds used to pay down debt, the note said.