Despite stronger sales and satisfactory after-tax-profit results, overall profitability levels fell at China's top 500 private enterprises in 2005, according to a report from the All China Federation of Industry and Commerce.

The ratio of net profit to sales at those companies stood at 3.82 percent, down on the 2004 figure of 4.58 percent. Profit per person declined from 28,900 to 26,100 yuan, the report said.

Given the slip in profits, the only way for private businesses to make money was to boost turnover, the report said.

The current situation reflects China's macro environment, said Ouyang Xiaoming, an official with the All China Federation of Industry and Commerce.

"The macro-regulation measures taken in 2004 are starting to impact companies," he said.

He said that hot market competition makes it hard for private enterprises to nudge up prices. Meanwhile, the soaring cost of raw materials is squeezing profits.

"In recent years, companies in resource-rich, monopoly areas have reaped most of the profits. Private companies are usually in competitive industries, where marginal profits are the norm," he said.

Source: Xinhua