Slowing growth for industrial sector continues

PUBLISHED : Wednesday, 11 June, 1997, 12:00am
UPDATED : Wednesday, 11 June, 1997, 12:00am

China's industrial output growth in May remained flat compared with April reflecting a weakening domestic demand and over-capacity and price deflation in the manufacturing sector, according to economists and government figures.

May's industrial output grew by 11.9 per cent year-on-year to 178 billion yuan (about HK$165.18 billion), the State Statistical Bureau said yesterday.

The growth rate was the same as April's - down from 13.5 per cent in March.

Economists said yesterday they expected the industrial output to remain sluggish in the coming months as there was no signs of improvements in domestic demand for retail sales and imports.

China's industrial output rose 13.7 per cent year-on-year last year.

They said mainland factories were experiencing price deflation, and the experience was evident in both the state-owned enterprises and non-state sectors.

According to the latest research report from Indosuez W.I. Carr Securities, factory prices have been falling since early last year.

'By our calculations, factory prices have fallen by 11.5 per cent since early 1996 and by April were falling by 3.8 per cent,' the report said.

Given the deflationary pressure, the report said the authorities were unlikely to be troubled by a resurgence of inflation in the short term.

In April, the headline retail price index rose by just 1.1 per cent, compared with a government forecast of 6 per cent for the whole this year.

Other economists said the central government was unlikely to make new efforts to expand credit as they did during the last quarter of last year because officials were worried about the bubble on the stock markets, where most new credit ended up.

A breakdown of the May figures showed output of state firms and firms in which the state held controlling interests rose by 6.2 per cent to 99.7 billion yuan, slightly up from 5.8 per cent in April.

Output from collective industries rose by 13.3 per cent to 55.7 billion yuan, while the foreign-funded enterprises and the private sector showed growth of 16.2 per cent to 37.8 billion yuan, the official figures showed.

Chinese manufacturers sold 94.99 per cent of their output in May, up by 0.31 percentage points compared with a year earlier, according to the figures.

The bureau said 370,000 industrial state firms registered profits of 29.32 billion yuan in the first four months, up 39.2 per cent year-on-year. In April alone, profits were 13.05 billion yuan.

Production of raw steel was up 10.7 per cent, steel was up 6.6 per cent and steel products grew by 11.3 per cent.