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Industrial-company profits climb 42% in 1st 5 months

(Bloomberg)
Updated: 2007-06-27 10:53

China's industrial-company profits swelled 42.1 percent in the first five months from a year earlier,the National Bureau of Statistics said today in an e-mailed release

Combined net income increased to 902.6 billion yuan ($119 billion). Sales jumped 27.4 percent to 14.2 trillion yuan.

Soaring profits help to fund the construction of factories and mines, raising the risk of overcapacity. Premier Wen Jiabao on June 14 highlighted the risk of a rebound in fixed-asset investment and signaled the central bank may raise interest rates or curb bank lending.

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"Monetary tightening needs to be continued to avoid excess credit that funds more investment," said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong.

Chinese officials are concerned that an investment boom in stocks, factories and real estate, fueled by cash from record trade surpluses, may end in an abrupt economic slump.

Chemical-fiber companies' profits more than tripled, while those of steel makers more than doubled.

Tangshan Iron & Steel Co, a unit of China's second-biggest steelmaker, may report an 80 percent increase in first-half profit from a year earlier, the company said.

Coal companies' profits jumped 43.1 percent from a year earlier, while those of businesses manufacturing construction materials soared 70.1 percent.