State firms achieve solid rises in profit

China's biggest State-owned enterprises (SOEs) reported solid profit growth in the first half year, as they adjusted production and investment scales in accordance with State macro economic management measures.

The 191 central SOEs, the flagships of their industries, realized 225.4 billion yuan (US$27.2 billion) of profit during the first six months of the year, up 38.6 per cent year-on-year.

The SOEs in the industries of petroleum, petrol and chemicals, metallurgy, transportation, mining, telecommunications and power were the biggest gainers, contributing about 81.7 per cent of the profit growth, according to a press release yesterday by the State-owned Assets Supervision and Administration Commission (SASAC), the supervisor of the central SOEs.

Transportation businesses recorded biggest profit growth, at 344 per cent in the first half-year on a year-on-year basis, as orders increased rapidly with surging demand for coal, oil and other raw materials.

Growing demand for various commodities also gave strong impetus to the energy and power industries.

The State Grid Corporation, for example, realized cross-regional electricity transmission of 28.3 billion kilowatt-hours during January to June, 212 per cent up compared to the same period a year ago.

The central SOEs have tried their best to increase coal, power and oil production and transportation capacity to secure market supply, a SASAC spokesman said.

The coal enterprises, for example, managed to meet the demand for coal in major power plants when supply was tight.

Transportation and coal companies are also performing well among listed firms.

Chen Huiqin, an analyst with Huatai Securities, said that coal companies with excellent performances and sufficient funds supply, as well as port, road and transport companies were preferable stock picks in the second half of the year.

As China's economy stays on a fast growth track and the growth in demand for resources continues to outstrip supply, resource-oriented enterprises, such as coal, power and other energy resource firms, are expected to maintain momentum and benefit from further price rallies in such products.

To cool down the economy, the Chinese authorities have conducted a series of macroeconomic controls to curb over-investment in overheating sectors and tighten credit supply since the end of last year, which have gradually taken effect.

According to SASAC statistics, the overall fixed assets investment made by the 191 central SOEs in the first six months of this year totalled 313.7 billion yuan (US$37.9 billion), a 34.4 per cent growth year-on-year, but the rate was down 7.4 percentage points from the growth in the first quarter.

And instead of blind expansion, most of the fixed assets investment was made in upgrading product structure, technology and product quality.

The slowdown in investment is more obvious in central automobile enterprises, whose investment in new projects in the first half year only accounted for 0.7 per cent of all completed investments.

Central iron and steel enterprises have also successfully controlled investment growth, with a decline of investment in new projects. Meanwhile, now the SOEs are concentrating on restructuring their product lines to enhance competitiveness.

Shanghai Baosteel Group, for example, developed world-class stainless steel oil pipe.

Anshan Iron and Steel Group witnessed its output of newly developed products increase by 20 per cent in the first half year compared to a year ago.

As for enterprises related to agriculture, they have enhanced research and development to produce new crop seed and exerted themselves to ensure stability in foodstuffs markets and fertilizer supply, the SASAC release said.

Meanwhile, eight central SOEs were ranked in the Fortune Global 500 in 2003 released last week, accounting for half of all Chinese enterprises that made the list.

They include the State Grid Corp, Sinochem, China Mobile and Shanghai Baosteel.

Source: China Daily