In the first 11 months, the nation's 143 central SOEs earned 683 billion yuan ($100 billion) in profit, a 26-percent decrease from the same period last year, Li said in a statement issued by the SASAC. He pointed out several reasons for the profit slump. In the second half of this year, production and sales slowed significantly amid the worsening international environment with inventories piling up and less effective distribution, mostly reflected in policy-driven industries such as oil and coal. As a result, the number of loss-making SOEs increased. The debt ratios of some SOEs were rising with less liquidity, while their previous expansion activities also led to a credit crunch at some enterprises, Li said.

Li said 2009 might be the toughest economic year for China. He urged the SOEs to make full use of this dark period to carry out systematic reforms to better prepare for a future recovery. Executives at the Wuhan Iron and Steel (Group) Corp. in Wuhan, for example, already had taken the initiative and cut salaries by 50 percent, he said.

Internationalizing the Yuan

China's central bank signed a currency swap agreement with its South Korean counterpart as part of the two countries' efforts to stabilize the regional financial environment.

The agreement, signed on December 12, gave both countries access to each other's 180 billion yuan ($26 billion), or the equivalent 38 trillion South Korean won, at any time during the next three years.

The People's Bank of China said this was the first time it had entered such an agreement since the outbreak of the current financial crisis. It also stated that if conditions permitted, the central bank would consider the possibility of setting up similar currency swap ties with other central banks to safeguard regional and global financial stability.

Zhang Bin, a researcher at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, told China Securities Journal that the China-South Korea currency swap could prompt the internationalization of the renminbi and help contain the impact of U.S. dollar fluctuations.

On December 16, Joseph Yam, President of the Hong Kong Monetary Authority, said in an interview with Xinhua News Agency that Hong Kong was looking forward to signing a similar agreement with the mainland so that Hong Kong banks could withdraw renminbi from the Monetary Authority to make loans to local importers and exporters who trade with the mainland.