SOEs go own way on fund use

Central State-owned enterprises are stepping up the establishment of independently operated financial institutions to strengthen their capital centralization and promote the efficiency of fund usage.

The move is part of central SOEs' effort to improve their financing capabilities, as banks' lending scale has been curbed, experts said.

CSR Co Ltd, one of China's largest metro vehicle manufacturers, announced on Wednesday it will open its own financing company with registered capital of 1 billion yuan ($159.9 million).

"Amid the rapid development of China's railway infrastructure construction, CSR's various kinds of business have expanded rapidly, leading to a booming capital scale and longer fund-chain within the corporation," said Zhan Yanjing, chairman of the board of CSR Finance Company Co Ltd.

Zhan said that this progress resulted in a greater need for cash flow management and financing capabilities, which are crucial to improve CSR's overall competitiveness and operating efficiency.

The newly established financial unit will be developed into an independent and modern financial enterprise, providing fund management and financial services, according to a statement from the company.

CSR's move comes only a week after its main competitor, CNR Co Ltd, launched its financing arm.

CNR , another State-owned railway transportation equipment conglomerate, inaugurated its finance company last Thursday with 1.2 billion yuan in registered capital, in a bid to boost its financial management capabilities.

China CNR Finance Co Ltd was established as its parent company is striving to become a leading multinational railway solutions supplier.

By 2015, CNR's annual revenue is set to reach 140 billion yuan, up from 89.3 billion yuan in 2011. The company has a greater demand for financing management, and increased operating efficiency of capital and cash flow, it said in a statement.

"The establishment of financing units within SOEs is a positive signal showing that those State-run industrial giants are trying to use capital more effectively amid the current tightening credit conditions," said Chen Daofu, department chief at the Financial Research Institute of the Development Research Center of the State Council.

According to Cao Yuanzheng, chief economist with Bank of China, macroeconomic policy is expected to remain stable next year and the monetary policy can be slightly eased.

Cao said there is little room for the lowering of commercial bank interest rates in 2013. Total lending is likely to be 8.5 trillion yuan, with 14 percent growth in the broad money supply.

The State-owned Assets Supervision and Administration Commission has urged central SOEs to boost their management and risk prevention.

More than 70 central SOEs have so far established their own financing companies, which become an important platform for their capital centralization, according to the commission.

"The new financing companies are similar to the internal banks of those SOEs, providing professional capital allocation and risk prevention services," Chen said.

Despite a tight monetary policy, China's railway infrastructure investment has been expanding rapidly, resulting in booming business for China's two largest train makers CSR and CNR.

Chinese railway infrastructure investment is set to reach a new high in 2013 of more than 516 billion yuan. Both investment and operational mileage will exceed those of this year.

Data released by the Ministry of Railways on Monday showed that railway infrastructure investment reached 431.9 billion yuan from January to November, an increase of 9 percent year-on-year.

baochang@chinadaily.com.cn

(China Daily 12/14/2012 page16)