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SASAC: Increase the leverage of central SOEs to clear up bad assets, expand equity financing, promote quality and efficiency

April 17th, 2018 01:53
Author: Liu Li Liang
source: China Securities Journal
edit:Oriental Wealth Network

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Summary
[SASAC: Increased central government leverage to clean up bad assets and expand equity financing to boost quality and efficiency] Peng Huagang, deputy secretary-general of the State-owned Assets Supervision and Administration Commission of the State Council, said on the 16th at the launch of the State-Owned Office that the central enterprises have maintained steady growth during the first quarter. The situation and the economic operation started well and achieved the first quarter of “opener”. The next step will be to expand the openness of the property rights sector and promote the participation of foreign capital in the reform of mixed ownership; further increase the degree of deleveraging and try to “halt the blood,” “blood-building,” and “hematopoietic.” (China Securities Journal)

Peng Huagang, the deputy secretary-general of the State-owned Assets Supervision and Administration Commission of the State Council, said at the press conference of the State-Owned Office on the 16th that in the first quarter, the central enterprises maintained a steady development trend and the economic operation started well, achieving the first quarter of “opener”. The next step will be to expand the openness of the property rights sector and promote the participation of foreign capital in the reform of mixed ownership; further increase the degree of deleveraging and try to “halt the blood,” “blood-building,” and “hematopoietic.”

  Improve quality and efficiency

In the first quarter, central enterprises realized a total operating income of 6.4 trillion yuan, an increase of 8.7% year-on-year; in March, they achieved an operating income of 2.4 trillion yuan, a year-on-year increase of 2.8%. Among them, the income growth of 18 companies exceeded 20%, and 41 companies exceeded 10%. Power, coal, machinery, commerce and other industries have experienced rapid growth in revenue, and petroleum, petrochemical, construction, and transportation companies have enjoyed steady revenue growth.

In the first quarter, the total profits realized by central enterprises amounted to 377.06 billion yuan, an increase of 65.07 billion yuan over the same period of last year, an increase of 20.9%; in March, the profit was 169.87 billion yuan, a year-on-year increase of 17.8%, and the monthly profit reached a record high. Among them, the efficiency gains of 38 companies exceeded 20%, and the profits of 56 enterprises increased by more than 10%.

Peng Huagang stated that from the perspective of the first quarter operating situation, the central enterprises have achieved positive results in improving the quality of their development while achieving rapid growth in their business performance. First, focusing on the development of the main business, the growth momentum of the entity enterprises is strong. In the first quarter, the central industrial enterprises realized a total profit of 212.81 billion yuan, a year-on-year increase of 26.7%, which was higher than the average increase of 5.8 percentage points of central enterprises. The increase in profits of industrial enterprises accounted for nearly 70% of the increase in profits of central enterprises, making them the most important profit growth of central enterprises. The motivation. The second is to insist on innovation and development, and the new kinetic energy support role gradually emerged. Third, some industriesFixed asset investmentTo achieve rapid growth, the investment structure continues to be optimized. In the first quarter, investment in fixed assets of central enterprises maintained positive growth for three consecutive months. Fourth, the operating efficiency has been continuously improved and the level of state-owned capital returns has continued to increase.

  Asset-liability ratio has steadily decreased

Regarding the leverage of the central enterprises, Peng Huagang stated that the stability of the assets and liabilities of the central enterprises has declined. At the end of March, the average asset-liability ratio of central enterprises was 65.9%, a decrease of 0.4 percentage points from the beginning of the year. Most corporate debt ratios have fallen from the beginning of the year, and nearly one-third of corporate asset-liability ratios have fallen by more than 1 percentage point from the beginning of the year.

He pointed out that deleveraging is a very important task for central enterprises in their economic operations in recent years. De-leveraging this year will further intensify efforts. The first is to stop bleeding and further clean up bad assets, especially loss-making assets. Strictly control "two kinds of money", strictly control high-risk businesses, and strictly control debt investments, including international operations and other types of risks, and strive to stop the bleeding.

The second is to “supplement blood.” Through the capital market, expand equity financing through debt-to-equity swaps, introduce various types of capital, further carry out mixed-system reforms, diversify shareholding reforms, and use market-based methods and means to increase capital.

The third is to “build blood” to further promote physical fitness, improve quality and efficiency, improve management and capital use efficiency, increase the value-creation ability, and continuously increase business accumulation. The State-owned Assets Supervision and Administration Commission of the People's Republic of China (SASAC) will further implement classification control, strengthen work supervision, increase assessment efforts to reduce leverage and reduce liabilities, and ensure the implementation of de-levering tasks this year.

  Increase openness and cooperation

In terms of open cooperation and international operations, Peng Huagang pointed out that central enterprises will increase their openness and cooperation, especially imports. At the same time, the central enterprises will be more open in the reform process, especially in the field of property rights. They will increase cooperation with various types of ownership enterprises and further promote the participation of foreign-funded enterprises in the mixed ownership reform.

He said that the growth rate of central enterprises in foreign investment is very fast. At present, the amount of overseas investment of central enterprises accounts for about 60% of China’s total non-financial direct foreign investment, and central enterprises have played a leading role; the turnover of foreign contracted projects accounts for approximately 70% of the total turnover of China’s foreign contracted projects, "All the way" along the line to carry out various forms of project cooperation nearly 2,000.

He emphasized that the risks of overseas investment by central SOEs, particularly security risks, are indeed a major problem encountered by central SOEs during the investment process. As a company itself, in the process of investment and cooperation, it is necessary to evaluate political risks and economic risks, as well as to assess risks in wars and turmoil, and to make plans well. At the same time, in the “going out” process, we must also actively integrate into local economic and social development.

                (Editor: DF309)

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