China’s state-owned enterprises, better known as SEOs, are dinosaurs. We mean dinosaurs of the Jurassic-world variety. They’re not companies, but rather spoon-fed entities, coddled by the government, much like a spoiled child sheltered from the ugliness of the world. Asia Unhedged views them like children on soccer teams who receive trophies to boost their self esteem, not for winning, but for just showing up, even though they have nothing to be proud of. In short, SEOs have outlived their usefulness.
China needs to open the doors to entrepreneurs, especially those running small and mid-sized firms. People who are willing to risk failure in order to succeed. In short, China needs more people who do more than just show up.
If you needed further proof of this, a recent report shows that government reforms to consolidate SEOs have yet to show any results as SEO continue to face headwinds amid a slowing economy.
For the first three quarters of the year, about 21% of the country’s listed SOEs, including their subsidiaries, posted losses. The worst 10 companies, alone, lost about 13.5 billion yuan ($2.1 billion), the Beijing Youth Daily reported on Thursday.
This comes despite measures by the government over the past few years to overhaul the State sector by instituting new measures, such as encouraging private investment and mixed ownership, in a bid to scrap off overcapacity and piling stock.
A lack of profit incentives, combined with inefficient cost controls, has led the SEO sector to become bogged by overcapacity and slow to upgrade its industrial sector.
Steel, coal, shipping and non-ferrous smelting are worst-hit industries, with steel and non-ferrous smelting companies making up 30% of the total and coal firms comprising 20%, said the newspaper.
Sinopec Oilfield Service, a wholly-owned subsidiary of Sinopec Group, fell the most posting a loss of 2.06 billion yuan for the nine months ended Sept. 30, followed by the 1.78 billion yuan loss by Chinese steel firm SGIS Songshan.
In February, the sector’s profits plunged 21.5% year over year o about 256 billion yuan, in what was the biggest year-on-year decline since 2009, according to an earlier report.