Top Biz News

Soaring profits might prompt investment

By Zheng Lifei (China Daily)
Updated: 2006-07-21 08:47

"The improved industrial profitability means companies have more capital at their own disposal and therefore make their investments greater," said Han Meng, an economist with the Chinese Academy of Social Sciences.

This, the economist said, might complicate the government's on-going push to cool down the economy, which it fears is overheating.

Chinese economic growth accelerated to a stunning 11.3 per cent in the second quarter from a year earlier, the fastest pace in more than a decade, according to figures released by the bureau earlier this week.

Urban fixed-asset investment soared 31.3 per cent in the first six months of this year, after it expanded 30.3 per cent in the first five months.

"The roaring economy may make companies more likely to flex their financial muscles and plough more of their earnings back into plants and other fixed assets investment to fuel their future expansion," Han said.

Divided into firms, private industrial enterprises reported the fastest earnings growth, followed by joint-stock companies, the statistics showed.

Profits made by private industrial enterprises surged 52.9 per cent in the first six month of this year from a year earlier, to 118.2 billion yuan (US$14.8 billion).
 
Joint-stock companies made a total of 440.6 billion yuan (US$55.8 billion) profit, climbing 30.5 per cent on a year-on-year basis.

State-owned industrial firms realized 364.2 billion yuan (US$45.5 billion) profits in the first six months of this year, a year-on-year increase of 18.6 per cent.

Profits of the industrial firms grew 23 per cent and 40 per cent in 2005 and 2004 respectively, according to the National Bureau of Statistics.