Profits at state-owned enterprises rose 22.3 per cent in the first half of the year compared with a year ago, but their expenses also increased rapidly, the Ministry of Finance said yesterday.
In the first six months, companies owned or controlled by Beijing and local governments reported a combined net profit of 1.13 trillion yuan (HK$1.36 trillion).
During the period, companies under the direct control of the central government posted a total profit of 765 billion yuan, up 18.8 per cent year on year.
Firms controlled by local governments saw a 30.5 per cent increase in profits to 360 billion yuan.
The combined revenue of all the companies jumped 24.2 per cent to 17.4 trillion yuan, while expenses rose 24.5 per cent to 16.4 trillion yuan.
The ministry warned company expenses had grown faster than revenue for three consecutive months.
According to government statistics, financial expenses surged the most, up 29 per cent in the first half, while operating costs rose 14.2 per cent and administrative expenses 17.5 per cent.
The sectors with the strongest profit growth include building materials, chemicals, nonferrous metals and coal, the ministry said, without revealing specific information for each sector.
The real estate, steel, electricity and trading industries grew significantly in May and June, while postal services and telecommunications firms posted lower profits last month.
The top five power-generating firms turned profitable since May, after incurring losses in the first four months of the year, the ministry said.
State-owned firms have been growing rapidly in recent years.
A record 61 Chinese enterprises made the Fortune 500 list of the world's top companies released last month, putting China behind only the United States and Japan for the number of companies on the list.
Of the Chinese firms on the list, more than 90 per cent are state-owned.
Energy giants Sinopec, China National Petroleum Corporation and State Grid top the list.
Analysts said more state-owned companies were outgrowing foreign rivals, thanks to the rapid growth of China's economy, the strengthening of the yuan, government backing and Beijing's encouragement of frequent acquisitions.
But despite having grown bigger, many are not very profitable and have poor cost control.
The amount of tax, in yuan, state-owned firms paid in the first half of this year - an increase of 28.9 per cent from a year ago