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Narrower tumble in industrial profit

CHINA'S industrial companies suffered a 27.9 percent drop in profit from a year earlier to 487.3 billion yuan (US$71.3 billion) in the first four months of the year, the National Bureau of Statistics said yesterday, but analysts forecast their earnings will rise in coming months.

The drop narrowed 4.3 percentage points from the decline in the first quarter and up 11.6 percentage points from the figure in the January-February period.

Analysts expect a further improvement in manufacturers' earnings in the coming months as China's economy may stage a mild recovery in the second quarter while producer prices may continue to fall, trimming production costs.

Among the 39 manufacturing industries, 23 posted improved profit in the first four months through April.

Petroleum and natural gas exploration firms posted a 181.3 percent surge in profit from a year earlier to 26.6 billion yuan after global oil prices fell to around US$65 a barrel from a record high of nearly US$150 a barrel in July last year.

Power producers returned to a profit of 2.19 billion yuan through April after posting a loss of 1.37 billion yuan in the first quarter.

"The data have shown a trend of improving conditions among industrial companies," said Li Maoyu, an analyst at Changjiang Securities Co. "As China's stimulus package begins to take effect, we may see an economic recovery and a rebound in profit among manufacturers."

China unveiled a 4 trillion yuan stimulus package at the end of last year which will last through 2010. The massive government spending is expected to boost domestic demand amid a global recession.

The Producer Price Index, the factory-gate inflation gauge, fell 6.6 percent year on year in April. It has been contracting for five consecutive months and has partly helped manufacturers to cut costs and widen their profit margin.

China's gross domestic product increased 6.1 percent in the first quarter of the year, the weakest expansion since 1992.


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