Government: Profit at major Chinese state companies falls in first half but rises in June

By Joe McDonald

THE ASSOCIATED PRESS

BEIJING — Total profit for China’s biggest state-owned companies fell by 16.4 per cent in the first half from a year earlier as an economic slowdown deepened, the government said Friday.

The squeeze for even China’s biggest, most politically favoured companies that benefit from monopolies and low-cost loans highlights the extent of the deepest slump since the 2008 global crisis as exports and domestic demand weakened.

Profit

for the 117 companies in the top tier of state industry fell to 387 billion yuan ($61.4 billion) for the six months ended June 30, the Cabinet’s State-owned Assets Supervision and Administration Commission said in a one-sentence statement.

The statement said

profit in June was up 8 per cent compared with May but gave no indication whether the government saw that as a sign growth was reviving. It gave no details of individual companies.

China’s economic growth slowed to a three-year low of 7.6 per cent in the second quarter. Analysts say the decline probably has bottomed out but they say the strength of a possible recovery is uncertain.

Beijing has cut interest rates twice since the start of June and is pumping money into the economy through higher investment by state companies and more spending on low-cost housing and other public works. Authorities are trying to use targeted measures instead of flooding the economy with money after a binge of spending and bank lending in response to the 2008 crisis fueled inflation and a wasteful building boom.

Companies and investors are closely watching China’s slowdown, which has dampened hopes the country will help to drive global growth as the United States and Europe struggle.

Premier Wen Jiabao warned last weekend a recovery was not yet stable, raising hopes Beijing might roll out still more stimulus. On Tuesday, Wen said the employment outlook “will become more complex and severe” and promised to make job creation a priority.

China’s expansion is still far more robust than Western economies or Japan but its companies have come to depend on unusually high growth to stay profitable.

Major

companies including airlines, manufacturers and retailers have warned of unexpectedly sharp drops of up to 80 per cent in first-half profits due to be reported in coming weeks.

Smaller retailers, construction companies and others have suffered bigger declines. Some say revenues are down by as much as half compared with a year earlier. Wen has promised more bank loans to the struggling private sector but entrepreneurs say they have yet to receive help.

SASAC-controlled companies include energy giant PetroChina Ltd., telecoms giant China Mobile Ltd. and the country’s biggest banks, insurers, airlines and steel producers.

The rate of decline in their total first-half profits was greater than the 13.6 per cent fall for the first quarter of the year, indicating the contraction accelerated in the second quarter.

Some 233 companies with shares traded on mainland China’s two exchanges expect to report losses for the first half, while another 449 expect lower profits compared with a year earlier, according to the official Xinhua News Agency.

08:58ET 20-07-12