State-owned Enterprises See over 20% Profit Growth for January-August, Leverage Edges Lower

China’s state-owned enterprises (SOE’s) have seen roaring profit growth since the start of 2018 on the back of capacity reductions and other supply-side reforms, leading to modest declines in their leverage levels.

State-owned holding companies saw total profit growth of 26.7% for the first eight months of the year, 10.5 percentage points ahead of China’s industrial enterprises above designated size and 16.7 percentage points ahead of privately run enterprises according to data released by the National Bureau of Statistics on 27 September .

Data from China’s Ministry of Finance further indicates that the total profits of SOE’s (including financial SOE’s) for the period from January to September were 2.3 trillion yuan, for an increase of 20.7%.

Analysts say the robust profit growth that SOE’s continue to enjoy is driven by capacity reductions and other supply-side structuring reforms.

Marked increases in upstream commodities have led to sizeable profit gains for the steel, coal and petroleum and petrochemical sectors in China, where SOE’s predominate.

As of the end of August the debt-asset ratio of SOE industrial enterprises above designated size was 59.3%, for a YoY decline of 1.4 percentage points.

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