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Downturn will hit SOE's also this year - Li Rongrong
2002/03/10

Beijing – Tax income will reduce as profits of State-Owned Entreprises (SOE's) continue for a second year, minister Li Rongrong of the State Economic and Trade Commission (SETC) announced during a press conference on Friday.

Falling prices, falling exports will cause a profit loss of 1.4 percent or 6.2 billion Renminbi (US$749 million) to 233 billion Renminbi (US$28 billion). "We are not very optimistic about this year's economic environment," Li was quoted as saying. "From January this year, we can clearly see the trend that prices are going down."

Deflation has been dogging China's economy since the Asian economic crisis in the second half of the 1990s and has never been brought under control. Since both investments and consumption do not seem to be serious under pressure the effects of the deflation might be limited.

SOE's continued to loose market share as the government closed down last year 460 SOE's, causing 700,000 job losses and wrote off 51.5 billion Renminbi (US$6.2 billion) in bad assets, the China Daily reports.

China's two largest oil companies Sinopec and PetroChina alone fired 600,00 workers and made reservations of  41 billion Renminbi (US$4.9 billion) for their compensation.

For this year China has set aside 80 billion Renminbi (US$1 billion) to deal with mergers and bankruptcies in the state-sector.

While Li promised to strengthen the smaller SOE's and allow them more freedom, the private sector develops into the real driving force of China's economy.

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