Domestic

SOEs will expand foreign business

By Bao Chang (China Daily)
Updated: 2011-02-25 09:27

BEIJING - China's central State-owned enterprises (SOEs) will try to expand their business abroad over the next five years, despite public concern about their earning abilities and ongoing political turmoil in some overseas markets, said a senior official in charge of the State assets.

"Central SOEs should concentrate on completing their industry chains, increasing market share and developing into top-ranking enterprises in the international market during the 12th Five-Year Plan (2011-2015)," said Shao Ning, vice-chairman of the State-owned Assets Supervision and Administration Commission (SASAC).

A man walking past a SOE logo in Beijing. China's major State enterprises are seeking overseas expansion as their profits from investment abroad increase. [Photo / China Daily]

As those enterprises have had good returns from overseas investment in recent years, Shao said, the SASAC encourages them to take further steps investing in foreign countries.

Established in 2003, SASAC supervises China's 121 central SOEs, including China National Petroleum Corporation (CNPC), China Mobile and China National Coal Corporation, each of which is a leader in the country's core industries.

Datang Telecom Technology Co Ltd, the State-owned microelectronics, terminals, communication application and service supplier, said it will establish telecommunication base stations in Africa in the next few years.

"We will continue to enter markets in Southeast Asia and Africa to improve the Chinese telecommunication industry's international competitiveness," said Chen Shanzhi, vice-president of Datang Telecom.

Earlier this month, CNPC signed an agreement with KazMunayGas on a cooperative project in Urikhtau, Kazakhstan.

Under to the agreement, the two parties will establish on equal equities a joint venture to develop the Urikhtau gas field, securing the gas supply for the phase-II Kazakhstan-China Gas Pipeline.

According to the SASAC, 37 percent of central SOEs' total profits in 2009 came from their overseas business and overseas assets of those enterprises account for 19 percent of their total assets.

Central SOEs generated profits of 815.1 billion yuan ($123.9 billion) in 2009, with assets totaling 21 trillion yuan.

Returns on assets of central SOEs' overseas investment was 7.54 percent in 2009, compared with 3.87 percent of their total assets in the same year.

The 21st Century Business Herald has reported that State-owned overseas assets have incurred great losses in the past few years, resulting in public concern about Chinese SOEs' profit-making abilities abroad.

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"Statistics on asset returns of domestic and overseas investments show that the level of returns on central SOEs' overseas business is higher than those enterprises' average overall level," said Wang Zhile, a researcher at the Chinese Academy of International Trade & Economic Cooperation under the Ministry of Commerce.

Zhou Fangzhou, an expert on State-owned enterprises, said greater efforts should be made in supervising overseas business, for the risk of investing abroad is much higher than investing domestically.

By the end of 2009, 108 central SOEs had entered foreign markets with assets of more than 4 trillion yuan.

According to the SASAC, most of the central SOEs' businesses abroad are located in places where both political and economic situations are often unstable.