Soaring industry profits fuel overheating fears

PUBLISHED : Thursday, 28 June, 2007, 12:00am
UPDATED : Friday, 28 October, 2016, 9:17am

Profits of mainland industrial companies surged 42.1 per cent year on year to 902.6 billion yuan in the first five months of this year, further fuelling concern that the economy is overheating.

Profitability increased in all but the crude oil and natural gas exploration sector, the National Bureau of Statistics announced yesterday, as it released figures that were consistent with the stronger than expected 25.9 per cent surge in the country's fixed asset investment over the same period.

'It shows the strength in China's profitability,' Credit Suisse First Boston chief regional economist Dong Tao said. 'There are signs of overheating.'

Economists warned that the sharp growth in industrial profitability could encourage Beijing to increase efforts to cool the economy and ensure that macroeconomic measures were executed at the local level in a more timely and efficient manner.

'It will make the central government more determined to prevent the economy from overheating,' said Paul Tang Sai-on, Bank of East Asia's chief economist.

The statistics bureau said enterprises with annual sales of five million yuan registered a year on year 27.4 per cent jump in revenue to 14.22 trillion yuan in the first five months.

The most rapidly growing among the 39 industries tallied was the chemical-fibre sector, which surged 220 per cent, followed by steel companies at 120 per cent.

Electricity producers recorded 60.6 per cent profit growth while coal companies posted a 43.1 per cent expansion.

'Sharp profit growth in the electricity, coal and steel sectors underscored the accelerated pace in industrial activities,' Mr Tao said.

Profits at state-owned or state-controlled industrial enterprises rose 42.3 per cent to 419.3 billion yuan while foreign companies including those from Hong Kong, Taiwan and Macau, leapt 38.6 per cent to 241.9 billion yuan.