Chinese SOEs still squeezed by finance costs

China's State-owned enterprise (SOE) profits continued to be squeezed by heavy financing costs in November, maintaining a trend that started earlier this year, the Ministry of Finance (MOF) said in a report released Monday.

Total revenue at China's State-owned non-financial firms increased 3.9 percent during the first 11 months of the year, to 43.4 trillion yuan ($6.98 trillion), slowing from 4.5 percent growth for the January to October period.

Revenue gains continued to be outstripped by operating costs, which increased 4.3 percent year-on-year.

Finance expenses were the primary driver, increasing 17.3 percent. Finance costs for the country's 113 central government-controlled enterprise groups, which accounted for more than 60 percent of State sector non-financial firm revenue, jumped 19.7 percent, the MOF said.

China's central bank in November announced the first cut in interest rates in more than two years, in a move that may help Chinese companies manage the rising cost of borrowing and help stimulate economic activity.

The Chinese government is also undertaking a series of reforms aimed at improving the efficiency, competitiveness and transparency of its State-owned industry.

SOE reforms will adapt to the new normal of economic growth, enlarge and strengthen State firms, and emphasize cost reductions, Xinhua News Agency said in a separate report on Monday, citing a meeting of the State-owned Assets Supervision and Administration Commission, which is responsible for overseeing central government SOEs.

China's State sector reported a 4.5 percent increase in total profits for the first 11 months to 2.24 trillion yuan, the MOF said, slowing from 6.08 percent growth for the first 10 months.

Firms in the nonferrous metals, coal, chemicals, petroleum and petrochemical industries continued to report declining net income.

Steel, automotive, transportation, building materials and electric power companies reported profit growth, the MOF said.