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Drop in industrial profit moderates

THE decline in profit at China's industrial companies moderated for the sixth straight month in another sign of an economic recovery in the world's third-largest economy.

The earnings of China's manufacturers fell 21.2 percent from a year earlier to 894.1 billion yuan (US$130.9 billion) in the first half of this year, the National Bureau of Statistics said yesterday.

The bureau said the pace of decline continued to slow, compared with decreases of 22.9 percent in the first five months, 27.9 percent in the January-April period and 32.2 percent in the first quarter.

"The improvement in industrial profit is expected and will continue as overall economic conditions in China have shown more signs of recovery - domestic demand is kept strong by massive investment while exports have also gradually stabilized," said Li Maoyu, an analyst at Changjiang Securities Co.

China's economy grew 7.1 percent year on year in the first half, up from the rise of 6.1 percent in the first three months after the country's proactive fiscal and monetary policies began to take effect. Investment contributed 6.2 percentage points to the first-half gross domestic product growth and consumption provided 3.8 percentage points. Exports, however, dragged down the GDP growth by 2.9 percentage points.

But the fall in China's exports also eased last month, with exports down 21.4 percent - an easing from the drop of 26.4 percent in May and 22.6 percent in April.

"The stabilizing demand in foreign markets will play a role to ease the profit decline in manufacturing companies while domestic demand is the decisive force to drive the profit back to positive," said Huang Xiangbin, an analyst at Cinda Securities Co.

In the first half, China's industrial production rose 7 percent on an annual basis, with the rate growing 10.7 percent last month alone thanks to China's 4-trillion-yuan stimulus package which lifted demand through infrastructure construction.

The government has stressed that it would stick to the current policy stance to ensure stable economic growth.


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