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Chinese SOEs need tax cuts after profits fall, says expert

Chinese state-owned enterprises (SOEs) saw revenues fall 6.3% year-on-year in January to October. This shows an increase in the speed of decline, from a 6.1% fall in January to September figures, the Global Times reported.25 Nov 2015

Profits fell 9.8% to 1.9 trillion yuan (US$297 billion) from January to October, following an 8.2% fall from January to September, the newspaper said, citing Chinese Ministry of Finance statistics.

The figures show that the economy, especially the industrial sector, hasn't bottomed out yet, Xu Hongcai, director of the Economic Research Department at the China Center for International Economic Exchanges told the Global Times.

"Demand is insufficient in both the domestic and the global markets, causing difficulties for industrial enterprises," Xu said.

The Chinese government should bring in fiscal policies to help domestic industrial enterprises, including tax cuts and measures to boost investment, Xu told the Global Times.

Figures from the Ministry of Finance also showed that SOEs face a tax bill of about 3.1 trillion yuan from January to October, up 0.8% year-on-year, the Global Times said.

The Chinese government has made several announcements on SOE reforms in recent months. State-owned news agency Xinhua reported this month that new guidelines had been published, and that an investment company is to be set up to structure SOES. 

In September the Chinese government released guidelines on SOE ownership and salaries. SOEs would be divided into two categories, for-profit entities and those dedicated to public welfare, it said at the time.

Earlier this year the South China Morning Post reported that the SOE reforms were expected to create 'Temasek-style' businesses, named after an investment company owned by the Singaporean government, which operates as a sovereign wealth fund.

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