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Industrial firms post smaller profit decline

PROFIT declines among China's industrial companies slowed for the sixth straight month, adding new evidence to a recovery in the world's third-largest economy.

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, the National Bureau of Statistics said today.

The pace of contraction kept slowing, compared with drops 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 show more signs of recovery. The domestic demand has stayed strong due to massive investment while exports will also gradually stabilize," 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 6.1 percent rise in the first three months after the country's proactive fiscal and monetary policies gained traction.

OF first-half GDP, investment contributed 6.2 percentage points and consumption devoted 3.8 percentage points. Exports dragged down the rate by 2.9 percentage points.

But drops in China's overseas sales also eased in June, with exports retreating 21.4 percent last month, softening from the decrease of 26.4 percent in May and 22.6 percent in April.

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

In the first half, China's industrial production expanded 7 percent on an annual basis, with the rate advancing 10.7 percent in June thanks to China's 4 trillion yuan stimulus package.

The central government has stressed several times that the country would stick to its current policy stance to keep economic growth stable.

Meanwhile, production costs remained at low levels, another contributor to the improvement of industrial profit, economists said.

The Producer Price Index, the factory-gate gauge of inflation, fell 7.8 percent in June, after decreases of 7.2 percent in May and 6.6 percent in April.


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