Li Rongrong, director of the State-owned Assets Supervision and
Administration Commission (SASAC), went
on record as stating that there remain four major negative
conditions that must be resolved before optimal management of
Chinese central state-owned enterprises (SOEs) can be achieved, and
the government should direct great attention to those primary
issues, according to People's Daily on December 26.
Li warned that if these problems cannot be effectively resolved,
state-owned enterprises may again fall into a financial trap.
Four problems
Problem 1 -- Some SOEs do not respond
effectively to the changing realities of business. Additional
effort should be devoted to promoting the strategic flexibility of
SOEs, so that the operations can better contend with evolutions in
the marketplace.
According to Li, due to changes in the market in the second half
of this year, growth of profits for some SOEs began to slow. The
matter of descending profits for 45 SOEs was somewhat serious, with
the net asset growth of 36 SOEs at less than 1 percent. From
January to November, the number of loss-generating enterprises was
17, and the ratio of loss-making enterprises to total SOEs reached
10.1 percent.
Problem 2 -- The increase
of SOE management expense is rising too fast. Compared to last
year, the cost of production for some SOEs increased by 23.5
percent. And there are 80 SOEs for which cost growth exceeded
income growth.
Problem 3 -- The fiscal
risk for some SOEs has increased. As of the end of November, the
central SOEs' loan volume was increased by 12.4 percent. The number
of industry enterprises for which the ratio of debts to assets
surpassed 70 percent was 27, occupying 42.9 percent; non-industry
enterprises for which ratio of debts to assets surpassed 80 percent
was 29, occupying 27.6 percent.
To maintain normal operating levels, some SOEs took out new
loans from banks to pay down old debt. Thus some now face the
potential crises of capital chain rupture.
Problem 4 -- The
non-regular management of finance. To put forth the image of
achievement, some SOEs provide false accounting information through
various means, such as delaying capital transfer, confirming
profits in advance and other substandard tactics.
Reaching a positive conclusion, however, Li expressed confidence
that settling these problems could produce great future
achievements.
(China.org.cn by Wang Ke, December 28, 2005)