Industrial firms see profit decline
By Xu Dashan (China Daily)
Updated: 2004-12-22 22:57

Profit growth by China's industrial firms continued to decline in November, due to central government macro-control measures.

The National Bureau of Statistics said yesterday that profit growth by the industrial firms grew 38.8 per cent year-on-year during the first 11 months, without providing separate profit figures for November.

But the bureau said earlier that profit growth by industrial firms grew 39.7 per cent year-on-year during the first 10 months.

Zhang Xueying, a senior economist with the State Information Centre, said the decline was mainly because of a drop in fixed asset investments resulting from macro-control measures.

The government has taken a raft of measures including raising the bank reserve requirements three times to cool investment in sectors such as steel and cement since the second half of last year.

In the latest move to cool investment, the central bank raised benchmark interest rates for the first time in nine years.

The rate on one-year loans was raised to 5.58 per cent from 5.31 per cent and the rate on one-year deposits was raised to 2.25 per cent from 1.98 per cent.

"The measures have had big impacts on the fixed asset investment and prices, which have close relations with the industrial companies' profits," he said.

Even so, Niu Li, another centre economist, said the profit situation was still good.

The strong demand backed by the country's fast-growing economy and the higher prices would also continue to fuel the industrial profit growth, he said.

The country's economy has stepped into a healthy development track, he said.

China's economy grew a year-on-year 9.5 per cent during the first three quarters of this year.

The economy is expected to grow 9.3 per cent for the whole of this year.

Aiming to prevent a rebound in fixed asset investments and prices, the government said it would continue to beef up and improve macro-control measures next year.

"This will make the country's economy become more healthy," he said.

The National Bureau of Statistics said that during the first 11 months, profits by the State-owned firms and firms in which the State holds a majority stake grew at a year-on-year 43.9 per cent, while that by overseas-funded firms grew only 25 per cent.

Earnings at crude oil and natural gas producers rose year-on-year 43.7 per cent to 166.3 billion yuan (US$20 billion) during the 11 months, while that of the steel sector rose 66.3 per cent to 91.1 billion yuan (US$11 billion).

Profits of building materials companies rose a year-on-year 48.7 per cent, while that of nonferrous metals smelters rose 71 per cent.

The industrial companies handed in 795.9 billion yuan (US$95.9 billion) of taxes to the State, an increase of 22 per cent from a year ago, the bureau said.

Net losses by money losing firms stood at 109.4 billion yuan (US$13.2 billion), up 9.1 per cent, it said.