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SOEs suffer great losses

(Xinhua)
Updated: 2006-03-28 09:53

The economic losses of China's State-owned enterprises (SOEs) rose 56.7 percent year-on-year to 102.6 billion yuan (US$12.75 billion) in 2005, according to figures released by the National Bureau of Statistics (NBS).

The growth rate was 49.1 percent higher than a year earlier, a record high in the past 16 years, the Economic Information Daily said in its report.

Latest NBS statistics showed in the first two months of this year, the State-owned and State-controlled enterprises suffered losses totaling 26.2 billion yuan (US$3.25 billion).

NBS chief statistician Jiang Yuan said rising production costs, ineffective pricing system, overcapacity and lack of key technologies are the main causes for the decline in profits.

He said? sales revenues by SOEs grew 20.5 percent in 2005, while their sales costs rose 22.8 percent. The surging price of energy and raw materials in the upper stream had exerted a huge pressure on the SOEs in the lower stream.

Among the 39 key sectors, the growth of sales costs in 29 of them was higher than the growth in sales revenue.

The profits of enterprises related to the auto, petrochemical and electronics industries fell dramatically, exerting a negative impact on the whole SOEs, he said.

Jiang also said a lack of a market price mechanism for some resource products, such as oil, had caused big fluctuations in the profits of related industries.

For example, China's state-owned oil processing enterprises lost 22 billion yuan in profits as a result of soaring crude oil prices in the global market and the relatively low price for refined oil in the domestic market, which has been frozen since last July.

Saturday's price rise for processed oil by the National Development and Reform Commission, is widely believed to be part of China's efforts to offset refinery losses and bring domestic prices closer to international levels, industry insiders said.

Ex-factory gasoline prices were raised by 300 yuan (US$37.5) per ton while the cost of diesel oil rose by 200 yuan (US$25) per ton.

Meanwhile, the profits of SOEs in iron and steel, aluminium, coke, auto and copper industries also dropped as a result of expanding production capacity and oversupply.

Last year, the profits of state-owned iron and steel enterprises fell 9.1 percent, the first time in six years.

Jiang underlined the lack of key technologies as a factor causing declining profits for the telecommunications, computer and electronics industries.

Last year, the profits of SOEs in these sectors came to 3.1 billion yuan, a year-on-year drop of 62.1 percent, while the non-state-owned enterprises achieved a profit growth of 10.3 percent.

State-owned cell phone producers alone suffered economic losses totaling 1.6 billion yuan in 2005.

The market share of home-made handsets fell to less than 40 percent from 60 percent over two years, Jiang said.

The same phenomenon occurred in the production of flat panel color televisions. About 54 percent of the state-owned and state-controlled TV manufacturers suffered losses of 3 billion yuan last year, he said.