1970-01-01 08:33:28
China's government says state-owned enterprises (SOEs) should exercise prudence when investing in 2009 to prevent financial crisis as the global economy teeters on the brink of collapse.
The State-owned Assets Supervision and Administration Commission (SASAC) made the request in a circular issued late Monday. It's the first time SOEs have been asked to be cautious about investment budgets in stock markets and futures markets.
Shanghai Securities Journal believed the statement was a signal that SOEs would cut back on investment specifically in securities markets.
Li Feng, a senior analyst with China Galaxy Securities, said SOEs invested hundreds of billions yuan in securities markets, which is less than 10 percent of the overall volume.
Feng said, fewer SOE investments would not have much impact on the securities market.
According to the circular, SOEs should also seek long-term balance between funds used for operation and investment.
Guaranteeing stable capital supply and preventing financial risks are among the government's top concerns for the coming year.
Turbulence in domestic and international economic environments has led to rising uncertainties for SOEs. Enterprises don't know how much to budget for things like energy, raw materials and labor.
Meanwhile, financing is more difficult for businesses due to a tight monetary policy.
In the first half of 2008, SOE profits were down 10.3 percent year on year to 425.6 billion yuan (62.3 billion U.S. dollars) despite a double-digit growth of sales revenue.
In the circular, SASAC ordered 147 SOEs, under its supervision, to map out fiscal budget reports for 2009.
"Centrally-administered SOEs should strive to increase revenue and reduce expenditure. Try every means to cut budgets in cost and expenditures," said the notice.
SOEs with shrinking profits were prohibited from a budget increase.
The SASAC demanded SOEs submit budget reports before Jan. 31, 2009. Those reports should cover operations of all in-house units, subsidiaries both at home and abroad, institutions and construction projects under SOEs' administration.
Source: Xinhua