China reports slower industrial profit growth

China's major industrial companies registered a year-on-year 15.8 percent profit increase in the first five months, said a report from the National Statistics Bureau Wednesday.

The growth rate, nearly 28 percentage points lower compared with a year ago, represents a three-year low.

"China's industrial profits shrank due to the long-term price hike of raw materials and energy products, as well as the sagging market demand in some sectors which were overheated last year,"

Zhang Xuewu, an senior economist with the Price Monitor Center of the National Development and Reform Commission (NDRC) told Xinhua in an exclusive interview Wednesday.

"But it does not indicate a cooling-down sign of the Chinese economy," said Zhang. "Instead, the growth rate is in the range of healthy growth. "

China's industrial profits were very low in 1998 and 1999, Zhang said. Since 2002, the profits started to increase fast, keeping a rare growth rate as high as 30 to 40 percent to compensate the long-term company losses. Now the growth rate is returning to an acceptable level, he said.

Major industrial companies in China include all the state-owned companies and other companies with sales revenues of more than five million yuan (some 600,000 US dollars).

In the first five months, macro-control measures on the overheated sectors, including the real estate industry, started to show effect, said Zhang. While the growth pace of real estate fixed assets investment slowed down, the profit of construction materials, including cement, reported a 31.3 percent drop.

The oil processing, together with the coke industry lost 1.03 billion yuan (124 million US dollars), according to the report. This is partly because NDRC, China's economic planning agency, lowered the gasoline and fuel price in this period, said Zhang.

The profits in the electricity industry shrank by 18.8 percent due to soaring coal prices, he said.

In this period, only mining industries such as coal, oil and non-ferrous metal industries, have enjoyed growth by large margins, said Zhang.

Zhang predicted that the world might see the energy price become stable in between six months and a year. By that time, the profit growth of different industrial sectors in China might become stable too, mostly enjoying an around 15 percent growth, he said.

Source: Xinhua