Guangdong's GDP up, but profits suffer

PUBLISHED : Friday, 22 July, 2005, 12:00am
UPDATED : Friday, 22 July, 2005, 12:00am

The profitability of Guangdong businesses dropped off significantly in the first half of the year but the region's gross domestic product continued to rise at a steady clip, according to preliminary data released on Wednesday.

Between January and June, Guangdong's GDP grew by 12.6 per cent year on year to 890.6 billion yuan, a rate Guangdong authorities described as sound and moderate.

The increase was fuelled by expansion in the agricultural, foreign trade and infrastructure sectors.

But the data indicated that total profits for Guangdong businesses with annual sales of at least 5 million yuan had risen by just 4.4 per cent in the first half of the year, a drop of 31.5 percentage points from the first six months of last year, according to the Nanfang Daily.

Ding Li , a professor with the Social Science Academy of Guangdong, said the slowdown in industrial profitability reflected faults in Guangdong's economic growth model, which was still largely based on labour-intensive industries.

Professor Ding said that with fierce competition coming from other coastal areas, especially from the Yangtze River Delta, Guangdong was no longer the dominant production centre.

'Production costs in Guangdong are higher than other places and this has resulted in a setback in the profit rate for enterprises.'

Professor Ding said Guangdong should focus more on technological innovation to maintain growth.