China’s SOEs are ‘shifting gears’ to boost earnings, adding innovation and supply-chain security to performance: Tsinghua analyst

The new approach, spelled out by Beijing earlier this year, represents a “distinct departure” from past efforts to lift the operational efficiency of these central government-controlled SOEs, said Zhou Lisha, research director at Institute for State-Owned Enterprises in Tsinghua University.

“Today, in addition to staying profitable and competitive among their peers, SOEs also need to develop an edge in innovative and strategically important areas such as renewable energy and artificial intelligence,” she said at a conference organised by China Securities in Beijing on Thursday. They also need to “make sure that their supply chains are safe and controllable”, she added.

China’s SOEs reported a 42 per cent drop in net profit to 1.1 trillion yuan (US$152 billion) last year, according to the State-owned Assets Supervision and Administration Commission. The nation’s economy grew 5.2 per cent versus 3 per cent in 2022, aided by the end of its zero-Covid policy.

In a late January directive, the commission emphasised income and value-add from “strategic innovative sectors” as key performance evaluation metrics for listed SOEs in 2024.

Besides innovation and R&D, the commission said it would include “market-value management” as part of its overall assessment of listed SOEs and their executives.