Industrial enterprises reported profits rising 39.7 percent
year-on-year during the January-July period, the National Bureau of
Statistics (NBS) announced on Tuesday. The growth rate was 1.9
percentage points lower than in the first six months.
During the seven months, industrial firms paid 483.6 billion
yuan (US$58.3 billion) in taxes to the state, an increase of 22
percent from a year ago.
Net losses were 76.2 billion yuan (US$9.2 billion), up 7.4
percent.
The slower profit growth suggests that the central government's
economic restraint measures are working, according to Zhang Liqun,
a senior researcher with the State Council Development Research
Center.
These measures, implemented since?the second half of last
year, have included raising bank reserve requirements three times
and curbing unwanted fixed asset investment projects.
"The measures should have a great impact on companies’ profit
growth," Zhang said.
Niu Li, a senior economist with the State Information Center,
said the shrinkage in fixed asset investment growth resulted in a
drop in overall demand, which had an impact on the companies'
profits.
“A price drop in raw materials also led to a decline in profit
growth,” said Niu.
Profits earned by the steel industry, a sector targeted by the
government in its drive to reduce investment, rose 71.2 percent in
the first seven months, 9.2 percentage points lower than growth in
the first six months, according to the NBS.
Profits made in the non-ferrous metal industry rose 91.5 percent
year-on-year during the period, 14.1 percentage points lower than
in the first six months.
Niu indicated that profit growth was still good, but that the
government should be alert for a rebound in fixed asset investment
and raw material prices.
Fixed asset investment rose in July, but Zhang pointed out that
a single month's figures did not indicate stability. He advised
watching the figures over the next several months. He remains
concerned that the slowdown could become excessive.
The government wants to bring economic growth down from the
current levels, where many resources such as oil have been
constrained, but needs it to stay above 7 percent to generate
enough jobs.
China's second-quarter gross domestic product climbed 9.6
percent year-on-year, following a 9.8 percent rise in the first
quarter.
"The national economy retained its stability and fast growth,
and economic efficiency improved continuously. . . . Individual
income rose noticeably," said NBS spokesman Zheng Jingping.
Zheng indicated that uncertain and unhealthy factors in China's
economic performance have been put under initial control, but the
government should be aware that some prominent problems in the
economy have not been fundamentally rooted out.
Energy and transportation bottlenecks and persistently rapid
growth in fixed asset investment in some sectors are still
troubling, he said.
Yuwa Hedrick-Wong, an economic advisor for MasterCard
International's Asia-Pacific region, believes that the Chinese
economy will continue to develop solidly in the coming months. GDP
growth should fall from 11 percent to 9 percent, shifting from
acceleration to cruise.
(
China Daily August 25, 2004)