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SOEs' plight worsens; profits, revenues slide

Central govt urged to implement new policies

Conditions for State-owned enterprises (SOE) deteriorated in October, official data showed on Monday, a development that experts said meant the central government should take further policy steps - especially tax cuts - to improve the situation.

SOEs' revenues slumped 6.3 percent year-on-year to 36.8 trillion yuan ($5.76 trillion) from January to October, higher than the 6.1 percent decline recorded from January to September, data from the Ministry of Finance (MOF) showed.

Profits contracted 9.8 percent to 1.9 trillion yuan from January to October,accelerating from the 8.2 percent slide from January to September.

The dual declines showed that the economy, especially the industrial sector, hasn't bottomed out yet, said Xu Hongcai, director of the Economic Research Department at the China Center for International Economic Exchanges.

"Demand is insufficient in both the domestic and the global markets, causing difficulties for industrial enterprises," Xu told the Global Times Monday.

According to the MOF, industries including oil and building materials saw a relatively sharp drop in their profits from January to October, while the steel, coal and nonferrous metal sectors "continued losses" during this period.

Xu said that the government should roll out more fiscal policies to prop up domestic industrial enterprises, and those policies should include tax cuts and measures to boost investment.

Figures from the MOF also showed that SOEs faced a tax bill of about 3.1 trillion yuan in total from January to October, up 0.8 percent year-on-year.

Xu said that easier monetary policy was also required. "Before the end of this year, the government might make another cut in banks' reserve requirement ratio," he said. That ratio sets the amount of cash that banks must keep on hand.

The government has announced guidelines for SOE reforms in recent months. An important part of that effort is mergers within various industries to boost competitiveness.

Shanghai-based news portal reported on November 19 that two shipping giants - China Ocean Shipping (Group) Co and China Shipping (Group) Co - might merge as early as January.

Zhong Dajun, director of the Beijing Dajun Institute for Economic Observation, told the Global Times on Monday that mergers would help enhance domestic SOEs' competitiveness.

But he cautioned that mergers alone wouldn't save all SOEs. "The decisive factor is whether the appointed leader (of the merged entity) is really competent," he noted.

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