According to the official data released by the Ministry of Finance, the profits of the State-Owned Enterprises (SOEs) have worsen in October, the SOES, however, have continue to increase leverage substantially.

Anbound's research team is of the view the occurrence of this situation is largely related to the fact that SOEs are able to obtain cheap credit. Moreover, the banks generally consider that the loans to SOEs are less risky.

Therefore, even though the economy is not good, the SOEs are still borrowing, as reflected by the rising leverage ratio.

It is highly likely that the increase of leverage by the SOEs will continue to enlarge ineffective investment and increase bad assets, as a result of which, it will slow down the economic transformation and structural adjustment.