A employee of State Grid, China's largest power distributor, works on electrical equipment in Yichang, Hubei province. [Photo / China Daily]

Experts warn momentum will be difficult to maintain amid weak conditions

Central State-owned enterprises generated profits of 536.24 billion yuan ($87.46 billion) in the first four months of this year, a 12.8 percent increase on the same period in 2012.

Experts said the higher-than-expected growth reflected good momentum, but the prospects for this year remain tough.

According to the latest data from the Ministry of Finance, total profits generated by SOEs, including central and local units, hit 689.13 billion yuan in the four months, a rise of 5.3 percent from the same period last year.

The growth rate is lower than the 7.7 percent increase for the first quarter, and the average growth of 5.8 percent in 2012.

"Local SOEs are facing severe challenges because of weak market demand and unstable domestic economic conditions," said economist Ma Guangyuan.

From January to April, local SOE profits declined by 14.7 percent to 152.89 billion yuan, according to the ministry, a major reason for the slowdown in nationwide SOE profit growth.

Total revenues of the 115 central SOEs reached 8.69 trillion yuan from January to April, up 9 percent from a year earlier.

Local SOEs registered revenues of 5.31 trillion yuan, an increase of 12.3 percent year-on-year.

"Although the business efficiency of central SOEs for the first several months of this year continued to increase, the recovered growth and the development of different industries is still imbalanced," said Jiang Jiemin, chairman of the State-owned Assets and Supervision and Administration Commission.

Data from the Ministry of Finance showed the industries that witnessed the biggest profit growth included electrical power, electronics, construction and real estate.

The telecommunication, non-ferrous metals, coal, chemicals and construction materials sectors all saw falls in profits.

The ministry releases revenue and profit data on central and local SOEs nationwide each month.

"Central SOEs play a crucial role in maintaining China's economic growth, and must try to keep their profit growth above 10 percent for the whole year," said Jiang, adding that guaranteeing central SOE business growth will maintain an increase in the country's overall economic growth.

Ma, the economist, said: "Growth in total profits generated by central SOEs in the first four months are better than expected and reflect good momentum.

"However, it will be difficult to maintain 10 percent annual growth in central SOE profits this year, because of the weak national economic conditions and unfinished industrial adjustment."

Ma said SOEs are still in the process of industrial upgrading and dealing with overcapacity problems.

To contribute to the development of local economies, and to drive the national economy as a whole, central SOEs are stepping up their presence in local markets.

A conference promoting central SOE development in Sichuan province was held in its capital, Chengdu, last week.

"Pushing forward central SOE expansion in Sichuan is a key measure to implement China's development strategy in the western region," said Jiang during the event.

"Central SOE investment in Sichuan and the construction of a series of projects will boost the industrial transformation and upgrade of the province."