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Industrial profit drop prompts action

By Chen Yang (Global Times)

08:09, May 28, 2012

China's major industrial enterprises saw their profits drop by 1.6 percent year-on-year in the first four months of 2012, the National Bureau of Statistics said yesterday, prompting policymakers to take more aggressive steps to support growth.

The total profits of the country's major industrial companies with annual revenue above 20 million yuan ($3.15 million) amounted to 1.45 trillion yuan from January to April 2012, the statistics bureau said in a statement.

By comparison, the profits of China's major industrial enterprises for the full-year 2011 increased 25.4 percent to 5.45 trillion yuan.

"The profit decline this year is mainly due to the rising costs of labor, raw materials and transportation," Chen Naixing, a researcher from the Chinese Academy of Social Sciences, told the Global Times yesterday.

"Meanwhile, policies to reduce tax burdens for some industrial enterprises have not yet been fully implemented, further squeezing their profit margins," he said.

The latest figures, together with sluggish April data on industrial output and exports, have raised attention of Chinese policymakers.

The State Council said Wednesday that the downside risks to China's economic growth are increasing and the government would speed up implementation of significant projects which are highlighted in the country's 12th Five-Year Plan (2011-15).

The National Development and Reform Commission (NDRC), China's top economic planner, has stepped up the approval of new projects.

"Some infrastructure projects, which were delayed or cut back in the past few years, will be started again this year to revive growth," Chen said.

In May alone, the NDRC approved three steel mill projects in Hebei and Guangdong provinces and Guangxi Zhuang Autonomous Region, amounting to a total investment of more than 130 billion yuan.

The commission also approved 328 projects across agriculture, road construction, and environmental protection sectors in April, compared with 173 projects a year earlier.

"Investment is still the main driver of China's economy in the long term, and it can boost growth more quickly than exports and consumption," Zhuang Jian, a senior economist with the Asian Development Bank, told the Global Times yesterday.

Zhuang believes the latest stimulus efforts will not be as big as the 4 trillion yuan package released in 2008, and will mainly focus on agriculture, utilities and energy-saving sectors.

"Authorities should prevent repeated construction and overcapacity problems in this round of investment," he said.


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