Costs, liabilities grow quickly in Chinese state firms

China's state enterprises face rapidly expanding operating costs and liabilities from January to October, the Ministry of Finance (MOF) said on Tuesday.

Operating costs of state enterprises grew 4.8 percent year on year to 38 trillion yuan (6.2 trillion U.S. dollars) in the first ten months, outpacing a 4.5 percent increase in operating revenue, according to MOF data.

Liabilities rose 12.1 percent to 65.5 trillion yuan, 0.2 percentage points faster than the growth in assets.

Despite all the pressure, China's state firms reported nearly 2.1 trillion yuan in profits from January to October, up 6.1 percent year on year. In the first nine months, the profits increased 5.9 percent.

Li Jin, chief researcher with the China Enterprise Research Institute, attributed the slightly improved profitability mainly to the higher managerial levels at state firms.

But enterprises in sectors of nonferrous metals, coal, chemicals, petroleum, post and telecommunications largely suffered losses.

The expert blamed the losses on quickly growing financial costs, which have been "the most important reason responsible for state firms' losses."

"This means the problem of high financing cost has spread to state firms. It is also difficult for some under-performing enterprises and companies in sectors suffering overcapacity to get credit from banks," Li said.

With continued pressure on the Chinese economy, China's State Council pledged a list of measures to ease financing burdens for companies, a prominent bottleneck for businesses.

The announcement was followed by an unexpected decision by the People's Bank of China (PBOC), China's central bank, to cut interest rates last Friday, the first time in more than two years.

The intention is to lower market interest rates and private financing costs to help alleviate problems facing many enterprises, the central bank said in a separate statement after the interest rate announcement.

For rising liabilities, Li said that this should be a warning sign for the companies, suggesting that they strengthen reforms, adjust internal structure and boost innovation.

China has about 26,000 state firms, according to a latest economic survey. Only about 113 are administered directly by the central government with the rest supervised by local authorities.

Tuesday's results did not include financial firms.