Production Vs. Profits

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According to official reports from the National Bureau of Statistics, profits at Chinas industrial firms rose 19.4 percent to RMB1.11 trillion in the first 10 months of 2005. The top four contributors to the growth in profits were said to be the oil exploration, coal, textiles and general equipment/machinery industries.

This growth may not be sustainable, as industrial production in November was up 16.6 percent (the highest for 5 months), and as producers face high stocks and the possibility of falling prices.

A different view on profits in the wider market showed that combined net profits of the 1,380 companies listed on China’s two stock exchanges fell by 2.81 percent in the first nine months of the year, compared to a year earlier. Revenues rose 23.7 percent in the same period.

2006 looks set to start with plenty of competition and price pressure. Good news for the increasingly important domestic consumers, but even they may not want to buy all the 200,000 unsold cars, made this year, that are gathering dust somewhere in China.

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