China state-owned firms profit up in first 11 months

[BEIJING] Profits at China's state-owned firms rose 2.8 per cent in the first eleven months of 2016 from a year earlier, aided by a raw material price rally and a construction boom, the Ministry of Finance said on Wednesday.

In October the year-to-date earnings by state-owned enterprises (SOEs) turned positive for the first time this year, with earnings for the 10 months showing 0.4 per cent growth from a year earlier.

Total profits at state firms stood at 2.1 trillion yuan(S$437.8 billion) in the first 11 months of the year, while revenue rose 2.4 per cent to 40.8 trillion yuan, the ministry said.

SOEs in the coal, steel and building materials sectors enjoyed relatively large profit growth, while firms in the textile, petroleum, and tobacco industries suffered significant falls in profit, the Ministry said.

Both factory prices and industrial profits showed robust growth in November, as prices of coal, steel and building materials soared, giving firms more cash to pay off mountains of debt.

China's debt to GDP ratio was 250 per cent at the end of 2015, according to the IMF, and with 11.6 trillion yuan in loans issued this year, the rate looks set to rise again in 2016.

State firms' total liabilities rose 10.9 per cent year-on-year to 87.6 trillion yuan at the end of November, while total assets posted the same growth to 132 trillion yuan, it said.

China's growth has stabilized this year, with 6.7 per cent expansion in gross domestic product in the first three quarters. But potentially slower economic growth has sparked fears that firms' debt servicing capabilities may be hampered.

Analysts also say recent signals from China's top leaders that more will be done in 2017 to crack down on asset bubbles is putting pressures on raw material prices, casting doubts over the sustainability of such a price rebound.

REUTERS