SCIO briefing on half-year central SOE performance

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Shen Ying, chief accountant of State-owned Assets Supervision and Administration Commission of the State Council

Xi Yanchun, the vice director-general of the Press Bureau, State Council Information Office

July 11, 2017

Xi Yanchun:

Ladies and gentlemen, good afternoon. Welcome to this press conference. The development of state-owned enterprises managed by the central government has drawn great public attention. Today, we are delighted to invite Ms. Shen Ying, chief accountant of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, to introduce details of the performance of central SOEs in the first half of this year. She will also answer some of your questions.

Now, let's welcome Ms. Shen to give her briefing.

Shen Ying:

Good afternoon, everyone, and welcome to the press conference. First, please allow me to extend my appreciation to you for your attention and support of the central SOEs and their reforms. Before answering your questions, I'd like to make a brief introduction of their performance in the first half of this year.

During the first half of this year, the central SOEs achieved stable performance and were able to move in a positive direction. Their revenues and profits both hit record highs. Their operational quality improved in an all-round way. Their structure also continued to show an improvement. New growth drivers have developed at a quicker pace. More contributions were made to society. Generally speaking, their performance showed the following features.

First, they maintained stable prduction and operation with good growth momentum,and those involved in key sectors saw stable production and salesin particular.

Facing a complex and fast-changing market, the central SOEs took proactive actions and enhanced their production management. Compared with the first half of last year, the production and sales of refined products in the petroleum and petrochemical sectors grew 0.8 percent and 2.1 percent respectively; the production of electricity by central SOEs in the power sector grew 4.4 percent; those in the grid sector saw their sales grow 6.7 percent; the production of raw coal and the sales of merchandized coal grew 9.1 percent and 16.6 percent; the total turnover of central SOEs in the air and water transportation sectors grew 9.9 percent and 5.3 percent respectively.

Second, central SOEs saw accelerated growth in terms of scale and profits, with monthly profits hitting a new high.

Compared with the first half of last year, revenues grew 16.8 percent to 12.5 trillion yuan this time round. The central SOEs enjoyed double-digit revenue growth for five straight months. Their total profits and net profits were 721.8 billion yuan and 535.32 billion yuan, respectively 15.8 percent and 18.6 percent higher year-on-year. Double-digit growth was also been seen every month this year. In particular, profits in June reached 159.67 billion yuan, a record high.

Of the 102 central SOEs, 99 enterprises made profits, 48 enterprises saw profit growth higher than 10 percent, and 29 profit growth higher than 20 percent.

Third, central SOEs were able to streamline their structure, focus more on quality and efficiency, and improve their performance in an all-round way. Since the beginning of this year, the SASAC and central SOEs took 58 measures to improve performance.

A special action was taken to control costs and enhance profits, a decisive issue in operations. In the first half of this year, the growth of revenues outpaced growth in costs. When comparing the second quarter with the first, costs fell 2.4 percentage points. Comparing on a year-by-year basis, , costs for every 100-yuan of revenue dropped 0.1 yuan.

Great efforts were made in structural streamlining and reducing the number of enterprises with legal person status. By the end of June, the number of central SOEs with legal person status dropped 11 percent compared with last year. Of all the streamlined enterprises, 87 percent reduced their management levels to three, four or five levels at most.

Enterprises were urged to clear up receivables and cut inventories. In the first half of this year, the growth of receivables and inventories was 10.5 percentage points lower than revenue growth. Assets turnover was thus improved.

Fourth, deepening supply-side structural reform and constantly enhancing the impetus for further development. SASAC and central SOEs have been adhering to the main line of deepening supply-side structural reform, accelerating structural adjustment, transformation and upgrading, and continuously boosting core competitiveness and sustainable development capacity. Firstly, earnestly implement the task of cutting overcapacity. In the first half of this year, 5.95 million metric tons of steel overcapacity has been removed, which means the target for the whole year has been accomplished already. In the coal industry, 6.59 million metric tons of coal overcapacity has been cut, and 13 million metric tons of production capacity reorganized. Secondly, redouble efforts to deal with the so-called "zombie enterprises and enterprises facing operational difficulties." Specific policies and working programs for individual enterprises have been worked out to deal with those "zombie enterprises" [virtually existing in name only] and subsidiaries facing operational difficulties, aiming to achieve tangible results. Thirdly, address issues left over by history at a faster pace. Over 50 percent of the work has been completed by central SOEs to spin off and transfer their obligations of "supplying water, electricity, heat (gas) and managing realty." Pilot programs in independent industrial and mining areas burdened with social responsibilities have been carried out smoothly. Fourthly, strengthen investment in strategic new industries. The investment has gone mainly to strategic new industries, advanced manufacturing, modern service industry, infrastructure and areas related to people's livelihood. Among these, the portion of investment going to new energy, machinery manufacturing, scientific research and modern service industry has increased by 4.4 percentage points. More than 500 platforms for mass entrepreneurship and innovation have been set up, 200-plus incubators for mass entrepreneurship and innovation and scientific industrial parks have been established and over 200 funds are now operational. All these aspects have laid a good foundation for future development.

Fifth, steady growth has been achieved in regard to tax contributions, with fees cut and part of the profits surrendered to lower costs for the whole society. In the first half of this year, central SOEs cumulatively handed over 1.1 trillion yuan of taxes and fees, with a year-on-year increase of 5.3 percent, which is 2.1 percentage points higher than the previous year. This has made a positive contribution to fiscal revenue growth. The taxes and fees handed over by central SOEs in industries like petroleum and petrochemicals, coal, commerce and trade increased by over 10 percent year-on-year. Meanwhile, related central SOEs have actively fulfilled their social responsibilities, and strictly implemented relative national policies. As many as 74.71 billion yuan of fees have been reduced for the benefit of the whole society. Among them, telecommunications enterprises surrendered 11.78 billion yuan of profits by further "raising the speed and lowering fees," power enterprises contributed 17 billion yuan through the policy of cutting the price of electricity, petroleum and petrochemical enterprises provided 41 billion yuan by cutting the price of gas for non-residential purposes, and coal enterprises provided 4.93 billion yuan by applying a long-term contract price.

In the future, SASAC and central SOEs will closely unite around the CPC Central Committee with Comrade Xi Jinping as its core, and further implement the decisions and deployments of the CPC Central Committee and the State Council. With a strong understanding of the new development philosophy, we will focus on deepening supply-side structural reform and promote the work of maintaining stable growth, making structural adjustments, promoting reform, reinforcing Party building, improving management, and guarding against risks, etc. We will consolidate the hard-earned operational achievements and endeavor to maintain stable performance with good momentum for growth. We will definitely meet the goals set for the whole year to make greater contributions to the steady and healthy growth of the national economy, and present the 19th National Party Congress with outstanding achievements.

Thank you!

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