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Industrial profits climb at slower pace due to inflation
By Wang Yanlin |
June 27, 2011, Monday
|
Online Edition
Online Edition
PROFIT growth at China's industrial companies continued to moderate due to the country's easing economic growth and higher production costs.
Analysts said the moderation may last as long as tightening policies are in place to curb inflation.
The manufacturers' net earnings expanded 27.9 percent from a year earlier to 1.92 trillion yuan (US$296 billion) in the first five months, the National Bureau of Statistics said today. The pace slowed from 29.7 percent through April and 32 percent in the first quarter.
The profit growth has been weakening since the start of this year, contrasting sharply with a rate of over 40 percent last year.
"Higher prices of raw materials, less market liquidity, and decreasing demand at home and abroad all eat into industrial profit," said Li Maoyu, an analyst at the Changjiang Securities Co.
Producer Price Index in China, the factory-gate gauge of inflation, climbed 6.8 percent year-on-year in May, the same rate as in April. It was fuelled by rising prices of oil, coal and cotton and helped to drive consumer inflation in China to a 34-month high of 5.5 percent.
To tame price rises, China has raised the interest rates four times and lifted the reserve requirement ratio nine times since October.
Meanwhile, China's tightening monetary policy has refrained commercial banks from lending. New yuan loans in China totaled 3.6 trillion yuan in the first five months, down 12 percent from a year earlier.
Li Yining, a renowned economist and a member of the CPPCC National Committee, China's top political advisory body, said over the weekend that China's tightening measures are increasing the risk of bankruptcy for smaller companies and raising the specter of unemployment.
Li noted China's money supply has returned to a normal level and the country should not roll out more tightening measures.
Analysts said the moderation may last as long as tightening policies are in place to curb inflation.
The manufacturers' net earnings expanded 27.9 percent from a year earlier to 1.92 trillion yuan (US$296 billion) in the first five months, the National Bureau of Statistics said today. The pace slowed from 29.7 percent through April and 32 percent in the first quarter.
The profit growth has been weakening since the start of this year, contrasting sharply with a rate of over 40 percent last year.
"Higher prices of raw materials, less market liquidity, and decreasing demand at home and abroad all eat into industrial profit," said Li Maoyu, an analyst at the Changjiang Securities Co.
Producer Price Index in China, the factory-gate gauge of inflation, climbed 6.8 percent year-on-year in May, the same rate as in April. It was fuelled by rising prices of oil, coal and cotton and helped to drive consumer inflation in China to a 34-month high of 5.5 percent.
To tame price rises, China has raised the interest rates four times and lifted the reserve requirement ratio nine times since October.
Meanwhile, China's tightening monetary policy has refrained commercial banks from lending. New yuan loans in China totaled 3.6 trillion yuan in the first five months, down 12 percent from a year earlier.
Li Yining, a renowned economist and a member of the CPPCC National Committee, China's top political advisory body, said over the weekend that China's tightening measures are increasing the risk of bankruptcy for smaller companies and raising the specter of unemployment.
Li noted China's money supply has returned to a normal level and the country should not roll out more tightening measures.
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