China industrial profitability: from rapid to steady growth

The National Development and Reform Commission (NDRC) predicted on January 24 that the profits of China’ s industrial enterprises are estimated to grow about 20 percent in 2005, a slowdown from some 30 percent to 40 percent in the previous three consecutive years. This implies that the profitability of China’s industrial enterprises has shifted to the stage of steady growth, from rapid growth.

But Zhu Hongren, deputy director of the NDRC Economic Operation Bureau, said “such a transition is reasonable and rational.” He even pointed out that the growth stability of industrial economy is enhancing and the operational quality is rising steadily.

In 2005, there was also a phenomenon of profit transfer from downstream industries to upstream sectors, due mainly to high crude oil price on the international market.

By sector, oil, petrochemical and coal industries registered a profit growth of 30 percent to 40 percent, while light industry, textile, pharmaceutical and steel industries saw a profit growth of 10 per cent to 20 per cent. The power, machinery and cement industries incurred negative growth in the first quarter and their profit growth recovered remarkably in the following quarters.