High fuel prices cut SOEs' profits

By Si Tingting (China Daily)
Updated: 2008-12-20 07:54

China's central government-administered State-owned enterprises (SOEs) have fallen victim to this year's high fuel costs and might post a 20 percent profit decline compared with last year, said an official with the State-owned Assets Supervision and Administration Commission (SASAC).

It would mark the first profit drop in six years.

"China's central SOEs as a whole made a profit of about 1 trillion yuan last year, but this year, their revenues might only reach 800 billion yuan," said Wang Xiaoqi, director of the Planning and Development Bureau of SASAC.

A total of 143 of the country's biggest SOEs operate under the supervision of SASAC.

China's central SOEs recorded a larger-than-expected profit drop of 26 percent in the first 11 months of this year, according to SASAC statistics released on Monday.

A woman makes a phone call at a booth of State-owned operator China Telecom in Wuhan, Hubei province. [China Daily]

Of the 143 SOEs, 75 companies posted a profit growth in the period while petrochemical and power firms suffered the sharpest fall in earnings, the commission said.

"The oil refining and power generation sectors are the worst hit this year," Wang said.

"China's major oil refiners purchased in crude oil at a very high price earlier this year and they are selling their oil products at a state-controlled price, which is not enough to cover their costs."

And the country did not raise electricity prices in recent months even though power producers are suffering from huge losses caused by record high thermal-coal cost, he said.

Spot coal prices reached a record 1,030 yuan a ton at the Qinhuangdao port, China's largest coal port in Hebei province, in July.

To help narrow generators' losses and ease China's power shortages, the government raised the price of electricity sold to grid operators by 6 percent starting August 20, the second tariff increase this year. However, the adjustment was not enough to offset rising coal costs.

Until now, spot coal prices at the Qinghuangdao port have fallen more than 40 percent, but that still cannot ease power producers' burden.

"China's five biggest power generators, including China Huaneng Group and China Datang Corp, might post a total whole year loss of 55 billion yuan," Wang said.

Despite the losses in these two sectors, Wang said the performance of other sectors is relatively sound.

According to Wang, China's SOEs had been aware of the possibility of a global financial crisis earlier than its actual appearance and they are fully prepared for it.

"I believe China's SOEs will lead the country out of the shadow of the global financial crisis," he said.