---
title: "Shocking! Yili Received Over 1 Billion Yuan in Government Subsidies in One Year; Sanyuan's 2016 Subsidies Exceeded Its Profits!"
description: "It is often said that 'there is no such thing as a free lunch,' but for enterprises, government subsidies seem to be a kind of 'free lunch.' Data for 2016 shows that many Chinese dairy companies suffer from 'government subsidy dependence,' and many seemingly profitable companies would actually be in serious losses without these subsidies. Below, we look at the government subsidies received by 24 dairy upstream and downstream enterprises in 2016."
author: "New Distribution"
publisher: "New Distribution"
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published: "2017-07-20"
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# Shocking! Yili Received Over 1 Billion Yuan in Government Subsidies in One Year; Sanyuan's 2016 Subsidies Exceeded Its Profits!

> It is often said that 'there is no such thing as a free lunch,' but for enterprises, government subsidies seem to be a kind of 'free lunch.' Data for 2016 shows that many Chinese dairy companies suffer from 'government subsidy dependence,' and many seemingly profitable companies would actually be in serious losses without these subsidies. Below, we look at the government subsidies received by 24 dairy upstream and downstream enterprises in 2016.

"
It is often said that 'there is no such thing as a free lunch,' but for enterprises, government subsidies seem to be a kind of 'free lunch.'
"
Data for 2016 shows that many Chinese dairy companies suffer from 'government subsidy dependence,' and many seemingly profitable companies would actually be in serious losses without these subsidies.
Below, we look at the government subsidies received by 24 dairy upstream and downstream enterprises in 2016:
Data source: Annual reports of each company
**Yili Received Over 1 Billion Yuan in Government Subsidies in One Year**
In the dairy industry, if you want to find the company that receives the most government subsidies, Yili is one of them.
In 2016, Yili received 1.058 billion yuan in government subsidies. What does this number mean? The total subsidies received by Mengniu and Bright Dairy combined were less than one-third of Yili's.
Despite the huge amount, Yili showed good performance in return. According to Yili's financial report, its net profit attributable to shareholders of the listed company in 2016 was 5.662 billion yuan, of which government subsidies accounted for only 18.68%.
Of course, not all companies that receive government subsidies perform well. For example, Mengniu received about 220 million yuan in government subsidies in 2016 but suffered a loss of 751 million yuan.
**Many Dairy Companies Suffer from 'Government Subsidy Dependence'**
Statistics show that among the 24 dairy companies, 8 were in a loss state after receiving government subsidies, and some were overly dependent on them.
For example, Western Pastoral is a company overly dependent on government subsidies.
According to its financial report, Western Pastoral's net profit attributable to shareholders of the listed company in 2016 was a loss of 52.21 million yuan, but it received 49.14 million yuan in government subsidies, which reduced its loss by 47.64%. The same was true in 2015: its net profit was 23.11 million yuan, but it received 41.57 million yuan in subsidies, meaning that without subsidies, it would have been in loss.
Similarly, Qishi Dairy also relied on subsidies. In 2016, its net profit attributable to shareholders of the listed company was 35.31 million yuan, but it received 50.8 million yuan in government subsidies. It can be said that Qishi Dairy's 2016 performance was entirely supported by government subsidies.
Another example is Guangxi Guiniu Buffalo Dairy Co., Ltd., which had a net loss of about 1.66 million yuan attributable to shareholders of the listed company in 2016, but received 1.558 million yuan in government subsidies, reducing its loss by 48.41%.
The same applies to Original Ecology Pasture Co., Ltd. (hereinafter referred to as 'Original Ecology') and Yashili, controlled by Mengniu.
According to Original Ecology's financial report, its loss attributable to holders of ordinary equity for the year 2016 was 88.569 million yuan, and it received 43.915 million yuan in government subsidies, reducing its loss by 39.89%.
Yashili's financial report shows that its pre-tax net loss in 2016 was 333 million yuan, with government subsidies of 188 million yuan. This means that government subsidies reduced its loss by 36.08%.
**Sanyuan: Government Subsidies Higher Than Its Own Profits**
Net profit of 1.6871 million yuan, of which government subsidies accounted for 1.03 million yuan; after excluding various non-recurring gains and losses, the actual loss was 6.5819 million yuan.
This is the performance of Beijing Sanyuan Foods Co., Ltd. (hereinafter referred to as 'Sanyuan') in the first quarter of 2017.
However, Sanyuan's dependence on government subsidies is not only reflected in this financial report.
According to Sanyuan's 2016 annual report, its net profit attributable to shareholders of the listed company was 105 million yuan, while it received as much as 129 million yuan in government subsidies that year.
A securities industry insider told reporters that the accounting item 'net profit attributable to shareholders of the listed company' includes 'government subsidies.' Thus, after deducting government subsidies, Sanyuan's net profit was actually a loss.
Interestingly, Sanyuan's explanation in its financial report also seems to show its dependence on government subsidies.
In the first quarter of 2017 financial report, Sanyuan predicted that the cumulative net profit from the beginning of the year to the end of the next reporting period (i.e., the 2016 interim report) might be a loss or significantly change compared with the same period last year.
'In the previous period, subsidiary Hebei Sanyuan received 100 million yuan in Hebei Province milk powder enterprise development subsidies, but there is no such government subsidy in this period, so profits decreased year-on-year.' Sanyuan frankly stated one of the reasons.
**So, should those enterprises that often rely excessively on government subsidies be 'weaned off' from government subsidies?
Jie Xiaolan, a researcher at Zhongyan Puhua, believes that moderate or targeted government subsidies can help enterprise development, but for enterprises that rely too much on government subsidies, the government should clarify 'who should get government subsidies and who should not.' In addition, the use of government subsidy funds should be more transparent to reduce hidden interest transfers as much as possible."
Zhu Danpeng from the China Food Industry Research Institute judged that it will not be fast for some dairy companies to solve their dependence on government subsidies. 'The dairy industry is highly concentrated, with Yili and Mengniu above them. It will not be quick to change the state of dependence on government subsidies. So, we should give them some patience and tolerance.'
**Source: Food Economy**
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