Poor performing state units to be 'severely dealt with', says China

China will evaluate the performance of its state-owned enterprises (SOE) in 2014 and "severely deal with" companies that perform poorly, are continuously loss-making or do not meet safety standards, state news agency Xinhua said on Sunday.

Beijing hopes to move towards a more efficient model for such enterprises where the state retains ownership but management is more focused on getting returns on investment than meeting policy goals.

The government is also seeking to alleviate entrenched industrial overcapacity aggravated by state firms over-investing.

Huang Shuhe, deputy head of the State-owned Assets Supervision and Administration Commission (SASAC), said the agency is working on policy changes to make the SOEs more competitive on the global stage, more profit-driven and make bigger contributions to the economy. SASAC is a ministerial-level body run by China's cabinet and is directly responsible for more than 100 state-owned companies, including Sinopec, Asia's top oil refiner, and China Mobile, which runs the world's biggest network of mobile phone users.

Xinhua said China's state-owned enterprises made about 1.3 trillion yuan ($214.22 billion) of net profit in 2013 and the number of loss-making firms had dropped significantly.

However, out of more than a hundred large SOEs that SASAC administers, only 11 posted a profit of more than 5 billion yuan. Many others remain deep in the red.

Huang said SASAC is determined to "severely deal with" companies that post persistent losses and SOEs that fail to adhere to higher environmental and safety standards will face tough punishment.

Analysts have said China needs to make sweeping reforms of its SOEs, while a senior policy researcher has said that most state enterprises would be turned into companies with diversified shareholders by 2020.