China's state-owned enterprises (SOEs) managed to report steady profits for 2019, a clear sign of the effectiveness of the government's previously rolled out reforms. For 2019, SOE's reported total profit growth of 4.7 percent when compared to the previous year.
Official government data shows that SOE's reached profits of 3.6 trillion yuan, or $521 billion, last year. According to the Ministry of Finance, total revenues for the same period for China's SOEs had reached 62.55 trillion yuan. This represents a 6.9 percent increase when compared to revenues recorded in 2018. Centrally-administered SOEs made total combined profits of 2.27 trillion yuan last year, an 8.7 percent year-on-year increase.
The solid growth in profits for China's SOEs has been attributed to the rollout of reform measures last year. This included the implementation of mixed-ownership reforms and major changes to the country's pilot free-trade zones in Shenyang, Shanghai, and Shenzhen.
China's three-year action plan to positively reform its SEOs is expected to continue this year, with a number of new measures to be rolled out over the first quarter of 2020. The measures are meant to optimize the use of SOE assets and hopefully spur further innovation in the SOEs' respective industries.
One of the ways the government hopes to achieve this is through the mixed-ownership reform. The strategic restructuring will be applied to various SOE sectors, including steel, non-ferrous metal, coal, and electricity. According to the State-owned Assets Supervision and Administration Commission (SASAC), the mixed-ownership reform has resulted in significant progress over the past year.
Through the reform, more than 1,000 new mixed-ownership enterprises have been established. This has, in turn, resulted in the addition of more than 150 billion yuan of social capital into the country's capital markets and property rights market.
SOE performance has also greatly been improved since the 18th CPC national congress in 2012. Around 41 enterprises have been restructured, with the most notable ones being the merger of China's two largest railway companies, China CNR Corp. Ltd and China CSR Corp. Ltd. The merger of two of the country's largest steelmakers, Baosteel Group Corporation and Wuhan Iron & Steel, has also resulted in the establishment of a much larger and more profitable enterprise.
Last year, two of the country's largest shipbuilders, the China Shipbuilding Industry Corporation and China State Shipbuilding Corporation Limited, were also merged into one corporation. China fully intends to push further mergers and restructuring to significantly increase efficiency and avoid overlapping investments.
