Official data just released shows profits earned by China's major industrial firms grew at their fastest pace in three months in June. This indicates government spending is supporting the corporate sector through tough times. Now for more on this, we are joined by my colleague Wu Haojun.
Q1: Some point to the figures as a sign that the worst has gone in terms of industrial profits, break the numbers down for us.
A: There are definitely a few bright spots in the industrial sector..but first here's the overall picture. Profits of China's major industrial firms rose 6.2 percent year-on-year in the first half of the year, narrowing from a 6.4-percent rise in the first five months. According to the National Bureau of Statistics, profits at industrial companies with annual revenue of more than 20 million yuan totaled 3 trillion yuan in the first six months. In June, profits of major industrial firms rose 5.1 percent, widening from a 3.7-percent growth posted in May. The bureau attributes the growth to increased sales, a milder decline in factory product prices and lower business costs. It also notes that the profit growth was concentrated in a few sectors, including electronics and petroleum processing. But state-owned industrial firms continue to struggle to turn a profit. In the first six months, their profits fell 8 percent, while those of foreign-invested companies increased 5 percent. Private businesses' profits rose 8.8 percent. It's a mixed picture.
Q2: You say state-owned industrial firms continue to struggle to turn a profit. Tell us more about that.
A: Well while the overall picture does look better... the circumstances are still far from ideal. The bureau says while June profits accelerated from May, unfavorable conditions for companies continue to exist. The bureau pointed to a few issues, including a concentration of profit growth in a select few industries, namely electronics, steel and oil processing, declining industrial efficiency in key sectors driving overall profit growth including oil extraction and power generation and funding turnover problems. And of course, it's important to look at all these within the larger context of the overall performance of the Chinese economy. It grew 6.7% year on year in the second quarter. That's the slowest since the global financial crisis, but also within the government's targeted range. So as I said before, it's a mixed picture.
