(Yicai Global) Feb. 24 -- The risk of bond defaults by Chinese state-owned enterprises is generally under control although their share of debt has risen slightly, according to an official at the state assets regulator.

The increased number of defaults last year can be attributed to many factors, Peng Huagang, secretary general of the State-owned Assets Supervision and Administration Commission, said at a press briefing yesterday.

They include external factors such as the impact of the Covid-19 pandemic and market fluctuations, and issues internal to the companies such as poor management and blind expansion, Peng noted.

The elimination of unfit entities through the balancing of risks is a normal market function that can benefit the long-term, healthy development of the financial market, Peng said. Central SOEs, which are directly supervised by the central government, have not defaulted on bonds since 2017, he added.

China’s SOEs had total profits of CNY3.5 trillion (USD541.7 billion) on revenues of CNY59.5 trillion (USD9.2 trillion) last year, according to SASAC data. They had assets worth CNY218.3 trillion (USD33.8 trillion) as of Dec. 31, a 12.7 percent increase from the beginning of the 13th Five-Year Plan in 2016.

Central enterprises aim to widen their profit margins, improve productivity and invest more in research and development this year, SASAC Director Hao Peng said. They also intend to grow profits at a faster clip than China’s economic growth rate.

Profits at central SOEs rose 2.1 percent to CNY1.4 trillion (USD216.7 billion) last year despite a 2.2. percent dip in income to CNY30.3 trillion. Profits grew 8.8 percent over the course of the 13th Five-Year Plan, while revenues gained 5.8 percent.

Over the five years, their assets rose 7.7 percent to CNY69.1 trillion. The amount invested in R&D climbed to 2.55 percent last year from 2.16 percent in 2015.

Editor: Kim Taylor