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Capital shortages top risk for China's SOEs

(Xinhua)
Updated: 2008-07-29 11:02

Lack of capital was the biggest risk facing China's centrally-administrated State-owned enterprises (SOEs), according to a risk assessment report released by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) on Monday.

A lack of capital worried most SOEs, especially those in electricity, petroleum, steel, investment, energy and real estate, said an expert participating in the evaluation of the report.

The expert, who declined to be named, attributed the shortage of funds to the tightening of credit, materials price hikes and reckless expansion.

The rapid expansion of some SOEs was believed to have resulted in the capital scarcity as the continuous tightening of monetary policies and bank loans failed to slow acquisitions and mergers.

SASAC director Li Rongrong warned against the "strong expansion impulse", saying investment beyond main business lines and capacities as well as investments with very low returns must be prohibited.

SOE acquisitions and mergers were strictly controlled, and they were banned from using bank credit to invest in securities, real estate and insurance, he said.