Floods force production growth down to 12.2pc low

Industrial production growth in China dropped sharply to an annualised rate of 12.2 per cent in July, hit by flooding in the south and hot weather, according to official figures.

It brought the growth rate in the first seven months to 13.1 per cent, down from 13.2 per cent in the first half and 13.4 per cent for 1995. The output value for the first seven months was 1,058.5 billion yuan (about HK$984.4 billion).

In January to July 1995, industrial output grew 13.9 per cent.

Officials appeared to worry about the slowdown as Xinhua (the New China News Agency), quoting the State Statistical Bureau, said the industrial sector showed a 13-14 per cent growth rate every month in the past half year.

Economists said severe flooding in the central and southern part of the country was partly responsible for the slowdown in industrial production.

They said the economy had also been weighed down by soaring debts and losses, and the falling efficiency of state-owned enterprises.

In July, the state sector reported a growth rate of 4.8 per cent, down from 5.8 per cent in the first half of the year.

Output by collectively-owned enterprises rose 17.2 per cent and output by private firms and foreign-funded enterprises rose by 12.6 per cent.

All sectors in July reported a slowdown over the previous months, Xinhua said.

Economists said they expected industrial output to pick up gradually following Beijing's recent decision to pump money into the state sector.

Figures showed that the state sector, which reported a net loss in the first quarter, had started to recover in the second quarter.

In January to June, state-owned industrial enterprises reported a net profit of 3.5 billion yuan after losses were deducted from profits, Xinhua said.

'However, high loss volume, huge debts owed by the companies and stockpiles of goods are still the major ailments of the state sector,' the agency said.