April 16, 2018 / 2:51 AM / a year ago

China first-quarter central government-owned firms' profits rise, debt levels ease

BEIJING (Reuters) - Total profit from China’s central government-owned firms accelerated in the first quarter while debt levels fell from the beginning of the year, suggesting Beijing is having some success with revamping its debt-ridden and lumbering state sector.

Profit in the first quarter rose 20.9 percent from a year earlier to 377.06 billion yuan ($60.03 billion), up from 15.2 percent for 2017 - the highest in five years, the country’s state assets regulator said on Monday.

For March, profit rose 17.8 percent from a year earlier to 169.87 billion yuan, the highest for a month on record, spokesman Peng Huagang told a news briefing.

The strong profit numbers could give Beijing leeway to push forward corporate deleveraging reforms as it aims to make state-owned enterprises (SOEs) more profitable and responsive to the market.

Indeed, the average debt-to-assets ratio was at 65.9 percent at end-March, 0.4 percentage point lower compared with the beginning of this year, Peng said.

SASAC said in January that China would cut the debt-to-asset ratio of central government-run enterprises’ by another 2 percentage points by the end of 2020.

The regulator encourages centrally-owned firms to list their traditional assets or introduce private capital into their traditional businesses and invest the money raised to forward-looking and strategic industries, Peng said.

SASAC will also increase efforts to clean up non-performing assets and strictly control high-risk businesses, including monitoring firms’ debt investments and their global businesses, Peng added.

Overseas investments by centrally-owned SOEs account for 60 percent of China’s non-financial outbound investments, Peng said.

China has already cut the number of enterprises administered by the central government to 98 from 117 in 2012 through a series of high-profile mergers and acquisitions.

The regulator will complete coal overcapacity cuts and firmly deal with “zombie firms,” Peng said.

He added that centrally-owned firms have cut 16 million tonnes of steel capacity and 62 million tonnes of coal capacity so far.

Reporting by Xiaochong Zhang and Beijing Monitoring Desk; Writing by Stella Qiu; Editing by Shri Navaratnam and Jacqueline Wong

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