China asks state-owned ‘national champions’ to help ‘stabilise’ economy, boost profits by 9 per cent in 2019

Editor’s note: In case anyone thought China was a free market, note that they are ordering their national champions to boost monopoly profits. They have economic management tools that we have never thought about.

China’s biggest 97 industrial conglomerates, known as the country’s national champions, have been asked to play their part as “stabilisers” in the national economy in a bid to offset the trade war with the United States by boosting their profits by 9 per cent in 2019, according to the state-owned Xinhua News Agency.

[Zhou Xin | June 17, 2019 | SCMP]

The State-owned Asset Supervision and Administration Commission (SASAC) set the target for the enterprises under its direct control, including state-owned oil and electric companies, with China’s overall industrial profits shrinking and economy slowing.

According to The Economic Observer, 20 of those 97 state enterprises, which have monopoly positions in specific industries, including the China Aerospace Science and Technology Corporation, China National Petroleum Corporation and State Grid Corporation of China, are required to achieve a 12 per cent profit growth this year.

In the first four months of 2019, the combined profits of China’s industrial enterprises fell 3.4 per cent compared to the same period last year, according to the National Bureau of Statistics.

The move highlights a reliance on large state-owned firms despite calls from China’s trading major partners, including the US and European Union, to reduce the role of state companies in economic activities.

According to China’s statistics agency, the aggregate profits of state-owned or state-controlled industrial enterprise fell 9.7 per cent year on year to 570 billion yuan (US$82 billion) in the first four months of 2019.

According to China’s Ministry of Finance, which in theory is the ultimate shareholder in state enterprises, combined profits of state firms rose 15.6 per cent between January to April to 831.9 billion yuan (US$120 billion), while combined profits of state-owned firms under SASAC rose 14 per cent to 579 billion yuan.

Read the original article here.

Get the latest in CPA news, industry analysis, opinion, and updates from Team CPA.