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Soaring industry profits fuel overheating fears

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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.

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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.

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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.

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