The profits of China's industrial companies declined at their sharpest pace this year in August, the National Bureau of Statistics said yesterday.

 

Net earnings among Chinese industrial companies fell 6.2 percent from a year earlier to 381.2 billion yuan (US$60.5 billion) last month, the worst this year. 

 

July's fall was 5.4 percent.

 

In the first eight months, earnings declined 3.1 percent to 3.05 trillion yuan, a sharp drop from last year's 25.4 percent rise.

 

"China's manufacturers are suffering from higher production costs, which are not compatible with the sluggish sales in both external and internal markets right now," said Li Maoyu, an analyst at Changjiang Securities Co. "The country needs to enhance policy efforts to support struggling industrial companies."

 

Chang Jian, a Barclays economist, said: "Slowing external demand and insufficient policy supports are two major risks that could further delay the modest growth recovery that people expect in the third quarter."

 

China's gross domestic product expanded 7.6 percent year on year in the second quarter, the slowest pace in three years. Some economists have cut their projection of third-quarter growth to as low as 7.3 percent.

 

However, there are signs of improvement. The HSBC Flash Purchasing Managers' Index, the earliest available indicator of China's industrial activities, rose to 47.8 in September from 47.6 in August, a two-month high although still indicating contraction. 

 

Xue Jun, an analyst at CITIC Securities Co, said previous modest supportive policy measures had helped to stabilize growth.

 

The slowdown, which has been longer than expected, has led to the government speeding up approvals for large investment projects, and to increase liquidity in the banking system through repos, or repurchase agreements.

 

China has also promised faster return of export tax rebates, more loans to exporters and wider coverage of export credit insurance, in the latest bid to cushion external blows on China's trade and its economy.

 

Private business still reported a profit growth of 15.1 percent in the first eight months, the statistics bureau said, while earnings of foreign-invested firms and those from Hong Kong, Macau and Taiwan slumped 12.7 percent. 

 

State-owned enterprises said their profits also fell 12.7 percent.

 

Among 41 industries tracked by the bureau, 24 reported profit growth during the January-August period, led by electricity generation and the supply industry, whose profits jumped 36.5 percent from a year earlier. 
 

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