China SOEs profits fell 13.8% in Q1

BEIJING - Many of China's State-owned enterprises (SOEs) reported drops in profits in Q1, as building materials, electronics and tobacco reported large profit declines, Ministry of Finance data showed on Tuesday.

The combined profits of China's SOEs fell 13.8 percent year on year to 432 billion yuan ($67 billion) in the first three months, although the decline narrowed from a 14.2-percent drop in the January-February period.

Total business revenue for state firms decreased 3 percent from a year ago to 9.95 trillion yuan, while operating costs went down 3 percent to 9.7 trillion yuan.

SOEs in the areas of petrochemicals and medicine saw profits grow, while oil, coal, steel, non-ferrous metals continued to suffer losses.

By the end of March, total assets of SOEs stood at 122 trillion yuan, while liabilities grew 18.1 percent year on year to 81.2 trillion yuan.

The figures, which exclude financial firms, were collected from SOEs in 36 provincial-level regions and those administered by the central government.

China has about 150,000 SOEs, many of which are uncompetitive with declining profits.

The government is determined to continue SOE reform this year, an important part of supply-side structural reform, according to Zhang Shuyu with the University of International Business and Economics.

Pilot programs this year are planned in payment distribution, investment of state capital and mergers and acquisitions.

The reform is not going as quickly as expected because the desire of SOEs to reform themselves is weak, as some of them control the country's most profitable sectors, such as railways, telecommunications and natural resources, Zhang said.

To press ahead with reform, the central government said in March it will encourage private enterprises to participate and allow private capital to invest in key sectors including power, oil, natural gas, railways, aviation and telecoms.