Profits of China's State-owned enterprises (SOEs) grew 25 percent year-on-year to 904.7 billion yuan (US$112 billion) in 2005, a record high, the Ministry of Finance said Thursday.

Zhu Zhigang, vice-minister of Finance, said sales revenue of the SOEs totaled 11.534 trillion yuan (US$1,424 billion) last year, up 19.2 percent from the previous year.

The vice-minister attributed the rapid growth to sound macro-economic practices, improved corporate governance, restructuring, and higher commodity and petrochemical prices.

China's macroeconomic regulation in the past year was designed to make its rapid economic growth sustainable by cooling investment in overheated sectors as iron and steel and cement, while increasing investment in agriculture, energy, transportation and public services, or the "weak links" of the country.

Since 1999, billions of yuan in government funding has been used to restructure China's State-owned sector in order to contain losses and improve profitability. Unprofitable firms have been closed while others have cut surplus employees and phased out of non-essential functions.

Between 1999 and 2004 China cut 80,000 SOEs, or 37 percent of the total. The number of SOE employees dropped 49 percent to 38.25 million, said Zhu.

Dramatic price increases for commodities and petrochemical goods pushed up profits of SOEs, as profits for firms involved in oil, coal and non-ferrous metals jumped 52 percent, 74 percent and 60 percent, respectively, the vice-minister said.

Driven by high demand and rising prices, energy, petrochemical and raw material sectors contributed 84 percent of the total profit growth of SOEs, said Zhu.

The vice-minister also said that profits of SOEs under direct control of the central government totaled 641.3 billion yuan in 2005, accounting for about 70 percent of all profit earned by SOEs.

(Xinhua News Agency February 24, 2006)