2014-05-23

SASAC Cuts SOE 2014 Profit Forecast to 5%

SASAC has cuts its profit forecast from 10% to 5% after profits only increased 3.8% in 2013 and growth was weak in the first months on 2014. Centrally-owned SOEs saw profits increase 6.9% from January through April, but local SOE profits were only up 5.1%. However, take out the tobacco and railroad monopolies, and the remaining 113 centrally-owned SOEs saw much lower profit growth. SOEs are worried that they will not even match 2013 profit growth due to a more difficult economic situation. In May, coal generated electricity consumption was down 3.1% (yoy) in the first third of May down to 6.1% in mid-May (this number looks worse thanks to rain in the south of China which have boosted hydro power generation.) According to the article, for every 1% drop in GDP growth, centrally-owned SOEs can see their profits decline as much as 5%. Almost two-thirds of SOEs suffer from overcapacity, along with high debt levels and rising inventory.

央企利润目标调低一半,部分央企仍感压力山大
recently, the Economic Observer newspaper reporter learned exclusively, SASAC central enterprises profit targets in 2013 has been lowered from 10% to 5% by 2014.

Even so, a number of central enterprises on the ability to complete a 5% profit indicators are still not confident. Part of the central enterprises started to worry, the central enterprises profit performance this year than last year, perhaps even worse. According to previously published data, the central enterprises profit for the year 2013 was 3.8%.

May 20, the State Council approved the Development and Reform Commission, "on deepening economic reform in 2014 focused on the task views," and that the focus of the next reform of state-owned equity diversification is to promote the reform of state-owned enterprises, government and social capital to establish cooperation mechanisms. This is also seen as central enterprises regain the only medicine in a predicament.

Profit Target: 5%

April 2014 recently published macroeconomic data remains weak continuation of the overall situation, this time more micro-level enterprises, especially massing huge central enterprises have begun to feel the chill.

Recent data released by the Ministry of Finance is the evidence, the latest data show that 1-4 months of state-owned enterprises realized a total profit of 742.84 billion yuan, an increase of 6.5%; among central enterprises 576.01 billion yuan, an increase of 6.9%; local SOEs 166830000000 yuan, an increase of 5.1%.

It is reported that since the Ministry of Finance announced the central business also includes tobacco, railways and other franchising and monopoly industries, excluding these sectors, the SASAC supervision of the 113 central enterprises profit performance will be even worse.

By this time, the macro data according to significant weakness. The latest data show that the growth rate of coal power generation in mid-May from -3.1% to -6.3% in early, indicating that power growth continues to decline.

It is understood that the internal central enterprises have been measured, by one percentage point decline in GDP of China's economy, the impact of a number of central enterprises "giant" on the central rate of profit can be up to 5 percentage points. For domestic and international macroeconomic this complex, the central enterprises "big headed" SASAC has been psychologically prepared.

SASAC stakeholders on the Economic Observer newspaper revealed that, compared to last year's 10% profit growth target this year, SASAC central enterprises to set profit targets just 5 percent, to ensure that 5% growth, and strive to reach 6%.

Although this goal compared with last year's goal, has been a great concession, but will more than half, some central enterprises also began to find it is not an easy data. They fear that this year's profit performance perhaps even worse than last year, the central enterprises profit last year was 3.8%. "This year could be said that since the last financial crisis, we feel that the most difficult time enterprise." One official said the central enterprises to the Economic Observer reported. In his opinion, on the one hand, there is nothing positive macro stage, but the situation is still overcapacity continuation. According to him, the current 113 central enterprises, nearly two-thirds of the central enterprises are facing the problem of excess production capacity, in addition, debt default, inventory and other high growing problem. "It will be able to see the quality of the central business run out stage is still relatively poor." He said.

The overcapacity in the steel industry is a typical industry. Lange Steel Information Research Center, Xu Liying recent statistics showed that in 2014 a quarter of the average of their steel industry statistics, 35 listed companies fell 2.56 percent year on year revenue, operating costs fell an average of 4.5%. Compared with the 2013 annual data, operating income, operating costs are likely to drop sharply.

In fact, not only the decline in the profitability of listed steel companies, steel industry as a whole is under threat. China Steel Association data show that in 2014 a quarter of domestic key steel enterprises realized 868.8 billion yuan sales income, profit -23.29 billion, representing a decrease of 5.604 billion yuan, the cumulative loss side to reach 45.45%.

Seen in this light, finally achieved profitability last year, the steel industry or difficult writing last year's results. Xu Liying also expected in the second quarter, the profitability of listed companies in the steel industry will remain low.

Those big profits tradition, this year began to reverse in the first quarter in the petroleum, petrochemical revenues and net profit are decreased.

In addition, the economic downturn and the tightening of monetary conditions in the environment, the central enterprises has become increasingly obvious pressure on cash flow, increase financial costs have been significantly higher than the total corporate profit growth. Ministry of Finance released the latest data show that the first four months of this year, the central corporate profit growth of 6.9%, while the company's financial expenses increased by 23.9%. According to the aforementioned central enterprises responsible person said, which does not rule out a lot of central enterprises in the old debt.

Leaving many central enterprises complain that the central enterprises to receive state capital budget to some sudden, enormous pressure to maintain growth this year of central enterprises is even worse. Earlier this month, the Ministry of Finance released the "central enterprises to further improve the proportion of state-owned capital gains received notice", requiring state-owned enterprises receive the proportion of profits payable increased by 5 percentage points on the existing basis.

According to relevant sources of central enterprises: "Although there before the Ministry of Finance invited us to participate in more than a dozen central enterprises discussion, comments, but we did not expect so soon dispatch a." According to reports, in accordance with the regulations, the Ministry of Finance issued a document handed over three days The money must go to the state treasury, cash flow this year the central rate already at hand is not very good, some central enterprises is only going to get bank loans to be paid this money.

Outlet

How collapsed, is now before the SASAC and the central rate of a problem.

A year ago, the general manager of a strong management consultants wish day began to wave good central rate observed predicament and reminded that "the central enterprises to adapt to the pattern of economic development over the past decade, investment, planning a variety of industrial 4000000000000 frequently introduced, and the central enterprises to do a large-scale patterns coincide. central enterprises are accustomed to the inner workings of 'progress', but not suited to the needs of the next 'shrink' the development of the state. "

And then the macro-control policies have been a big difference with 2009, when four trillion. Goldman Sachs economists Yu Song China, it observed that the weakness of the current round of economic growth, "the Chinese government did not simply through the expansion of monetary and fiscal policies to support investment, but more emphasis on the use of pro-growth structural reform measures from the point of view of long-term structural adjustment of the economy, such a move is better than simple relaxation radical move, but it may slightly slower onset. "

A central corporate stakeholders, "said four trillion when asset prices around the world are low, the hands of the central enterprises and money, you can even go around the world doing mergers and acquisitions, so the central enterprises a look on the up, but now the situation is not the same, even now have money, we can go do, no place to invest Yeah, each have excess production capacity, now engage in mixed ownership, we can not go out of the merger. "the source said companies can do now is watching.

Although I wish the wave good also pointed out that "the central rate of development must be to change the scale of the expansion path dependence, into dependence innovation path." But the interview digital central enterprises said that innovation is not an overnight thing, then let the central enterprises rely on innovation to complete the "growth" is the basic task impossible.

And some capital growth through an executive order to accomplish tasks required by the SASAC had previously been the practice in the enterprise seems unable to solve practical difficulties.

Above the central rate against the Economic Observer newspaper who said, "Let us, for example, said the SASAC to reduce receivables to cash is king, but our equipment out in the end not to the buyer, the buyer now because of the market downturn has been suspended holiday, give him became debtors, not to give him a scrap here is on us. "

So regain their central rate reform is seen as the only medicine in a predicament. Treasury Secretary has done business track and analyze the causes of depression are many state-owned enterprises, where "one is too big" (state-owned shares of Chinese SOEs accounted for more than 80%, the central rate of the Group's parent company basically 100% wholly-owned), the mechanism is not active, such as management and administration of the inherent play illness is the cause of the decline and the development of state-owned enterprises is not high quality of the underlying causes.

May 20, the State Council approved "Development and Reform Commission in 2014 focused on deepening economic reform tasks opinions" that followed, the focus is to promote the reform of State-owned diversified equity reform state-owned enterprises, government and social capital to establish cooperation mechanisms.

Insiders pointed out that the central enterprises profit in this special time worrying proposed reform ideas mixed ownership is very timely, mixed ownership is not to simply "mixed", but the central enterprises to improve efficiency and enhance competitiveness, sustainable development to talk is a way to go through this stage, look, this is the only way to ensure growth continues to be the central enterprises the main solution.

Song Yu said, and compared to the conventional methods of control, this round of regulation ideas for cooperation of state and private capital is especially obvious because such partnerships play an effective role on the premise that the institutional property rights to make more good protection.








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