Yearender 2007

    by Xinhua writer Wu Qiong     

    BEIJING, Dec. 21 (Xinhua) -- China's state-owned enterprises (SOEs) reported a year of prosperity. Annual profits were forecast to surge 30 percent to nearly a trillion yuan (135.8 U.S. billion) this year, however, it was evident many still had a long way to go to become internationally competitive.

    China currently has 152 centrally administered SOEs, all under the supervision of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC). They embrace many leading enterprises in key sectors such as energy, mineral resources, transport, telecom, machinery manufacturing and defence, among others.

    REFORMS LEAD TO GROWTH

    The SOEs saw their combined assets climb to 14.6 trillion yuan in the January-November period, an increase of 21 percent over the same period a year earlier. Their number fell from 159 at the beginning of the year as a result of mergers and the sale of some aimed to improve the structure of state assets.

    Meanwhile, the SOEs recorded gross profits totaling 918.66 billion yuan in the January-November period, up 31.7 percent from the same period last year. Net profits surged 33 percent to 552.21billion yuan.

    Earlier statistics revealed that the total assets of central SOEs had already jumped 146 percent. In addition, profits increased two-fold when the number of SOEs dropped to about 160 last year from 196 in 2002.

    Reforms were at the core of these impressive improvements of the SOEs, previously known for their "plump size and slack performance".

    After China's SOEs were separated from administrative government bodies to exist as independent enterprises, a major shift from the planned economy, these enterprises went through further shareholder reforms to build themselves into real corporate entities.

    In 2007, the pace of such reforms accelerated amid the country's efforts to further promote the leading role of these large enterprises, the "backbone" of the national economy, said Vice Premier Zeng Peiyan.

    As an important part of shareholder reform, another nine central SOEs offered initial public offerings this year, adding to the 33 SOEs listed domestically and abroad since the listing scheme launched in 2003.

    Li Rongrong, head of the SASAC, was supportive of the overseas listings of Chinese enterprises, saying overseas markets had more sophisticated approaches that could help improve management of Chinese SOEs.

    In a pilot move, the SOEs began to have outside directors. This was meant to make decision makers more detached from executive staff to better protect the interests of the company and common shareholders.

    Currently, 19 such SOEs, including China Baosteel Group and China Shenhua Group, have picked up 66 outsider directors. The outside directors at 17 companies consisted of half or more of their board of directors members.

    Since 2003, the SOEs started to recruit senior managerial staff in a more open way, whereas in the past these posts were not publicly available.

    This year, 22 vacancies for high-level positions in central SOEs attracted 1,603 applicants. These included 25 foreigners and 10 from Hong Kong, Taiwan and Macau.

    Li Fangyong, deputy general manager of China Aviation Industry Corporation I (AVIC I), and Jiang Zhenxin, deputy general manager of China Netcom Group, were among those who finally beat their rival competitors. No foreigners have been recruited yet.

    "Reforms have pushed central SOEs onto the front-line of the market to compete with other enterprises, including international companies. It is this kind of competition that has marked up the competitiveness of these SOEs," said SASAC analyst Peng Huagang.

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