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Rare profit drop for China industries
By Winny Wang |
March 28, 2009, Saturday
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Print Edition
Print Edition
CHINA'S industrial companies - battered by the global economic downturn - reported a slump in profits in the January-February period for the first time on record.
Net income for industrial companies generating annual revenue exceeding 5 million yuan (US$732,000) fell 37.3 percent to 219.1 billion yuan in the first two months, compared with 16.5 percent growth a year earlier, the National Bureau of Statistics said yesterday, adding that private Chinese companies performed far better than the state-owned sector and foreign firms. The bureau began recording the figures in February 2007.
"The sharp decline in profits was the result of shrinking demand that led to falling product prices and an increased inventory of raw materials," said Liu Tiejun, an analyst at Haitong Securities Co.
"We expect the profit decline will last for a year, but it should narrow to 20 percent in the first five months of this year as producers have used up their higher-priced raw materials and begun to purchase at lower prices."
Non-ferrous metals producers were hit the hardest, posting a loss of 1.93 billion yuan in the first two months, compared with a 12.8-billion-yuan profit a year earlier. The iron and steel industry lost 770 million yuan, down from a 25.5-billion-yuan profit a year earlier.
Thanks to plunging crude oil prices, refiners were a bright spot in the report, generating a profit of 11.7 billion yuan compared with a loss of 19.4 billion yuan a year earlier.
On an industry-wide basis, private companies reported total profit growth of 3.3 percent to 70.5 billion yuan, while earnings at state-owned firms dropped 59.2 percent to 56.7 billion yuan and foreign-funded companies fell 39.3 percent to 62 billion yuan.
Zuo Xiaolei, an analyst at Galaxy Securities Co, said the sharp decline may make companies less confident to invest in expansion and suggested that the government step up its push for more investment.
"Private and smaller companies contributed 65 percent to 70 percent to the country's economic growth, so the government should open up the monopoly industries during the economic downturn," Zuo said. "A country's economy won't be boosted only by government investment."
China rolled out a 4-trillion-yuan stimulus package in November last year to boost domestic demand and achieve its target of 8 percent economic growth this year. The country's economy cooled to a seven-year low of 9 percent growth last year.
Net income for industrial companies generating annual revenue exceeding 5 million yuan (US$732,000) fell 37.3 percent to 219.1 billion yuan in the first two months, compared with 16.5 percent growth a year earlier, the National Bureau of Statistics said yesterday, adding that private Chinese companies performed far better than the state-owned sector and foreign firms. The bureau began recording the figures in February 2007.
"The sharp decline in profits was the result of shrinking demand that led to falling product prices and an increased inventory of raw materials," said Liu Tiejun, an analyst at Haitong Securities Co.
"We expect the profit decline will last for a year, but it should narrow to 20 percent in the first five months of this year as producers have used up their higher-priced raw materials and begun to purchase at lower prices."
Non-ferrous metals producers were hit the hardest, posting a loss of 1.93 billion yuan in the first two months, compared with a 12.8-billion-yuan profit a year earlier. The iron and steel industry lost 770 million yuan, down from a 25.5-billion-yuan profit a year earlier.
Thanks to plunging crude oil prices, refiners were a bright spot in the report, generating a profit of 11.7 billion yuan compared with a loss of 19.4 billion yuan a year earlier.
On an industry-wide basis, private companies reported total profit growth of 3.3 percent to 70.5 billion yuan, while earnings at state-owned firms dropped 59.2 percent to 56.7 billion yuan and foreign-funded companies fell 39.3 percent to 62 billion yuan.
Zuo Xiaolei, an analyst at Galaxy Securities Co, said the sharp decline may make companies less confident to invest in expansion and suggested that the government step up its push for more investment.
"Private and smaller companies contributed 65 percent to 70 percent to the country's economic growth, so the government should open up the monopoly industries during the economic downturn," Zuo said. "A country's economy won't be boosted only by government investment."
China rolled out a 4-trillion-yuan stimulus package in November last year to boost domestic demand and achieve its target of 8 percent economic growth this year. The country's economy cooled to a seven-year low of 9 percent growth last year.
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