Profit From Chinese Central State-Owned Companies Increased in Q1
In the first quarter, total profit from Chinese central state-owned companies rose and debt levels declined. Q1 profit lifted 20.9% from 15.2% in 2017 to 377.06 billion yuan (60.03 billion dollars). China’s state assets regulator reported that the number marked a 5-year maximum. In March, profit was up 17.8% from 2017 to the monthly maximum of 169.87 billion yuan.
Such a positive data is likely to allow Beijing to go on with its corporate deleveraging reforms. The government is trying to increase SOEs’ (state-owned enterprises) profitability and responsiveness to the market.
Spokesman Peng Huagang also reported that the average debt-to-assets ratio indicated 65.9%, which was 0.4% less than in the beginning of 2018. By the end of 2020, China would lower the debt-to-asset ratio of central government-run enterprises' by another 2 pps. The official added that centrally-owned companies will be requested to present their traditional assets or private capital into their traditional businesses and invest the capital raised to forward-looking and strategic industries.
China’s spokesman also promised that the government will aim to take out non-performing assets and closely monitor high-risk businesses. China has already lowered the amount of enterprises administered by the central government from 117 to 98 in 2012 with a help from high-profile mergers and acquisitions. Peng Huagang claimed the regulator will finish coal overcapacity lowering and thoroughly deal with "zombie firms". Centrally-owned companies have already reduced 16 million tonnes of steel capacity and 62 million tonnes of coal capacity.