China's industrial companies generated total profits of 743.7 billion yuan (US$91.7 billion) in the first seven months of the year, the National Bureau of Statistics said yesterday in Beijing.

The figure represents an increase of 20.6 per cent over the same period last year.

Profit growth was 1.5 per cent higher in the first six months, but 17.4 percentage points lower than last year as a whole.

Wang Zhao, a senior researcher with the State Council Development Research Centre, said the current profit situation was in line with economic development.

The economy is unlikely to maintain the same speedy growth as last year, which registered a gross domestic product rise of 9.5 per cent year-on-year.

Zhang Xueying, a senior economist with the State Information Centre, said the accelerated profit growth in July did not mean there were significant improvements in the industrial companies' economic efficiency.

Industrial companies continued to shoulder great pressures from the high prices of energy and raw materials, he said.

"They are unable to transfer the increased costs into the prices of end-products," Zhang said. "They prefer to lose profits rather than market share amid fierce competition."

During the January-July period, prices for energy and raw materials rose 9.7 per cent year-on-year, and producer prices rose 5.6 per cent.

During the same period, consumer prices rose just 2.2 per cent.

Zhang said the high prices of products such as oil and steel, as well as fierce market competition, will continue to squeeze industrial companies' profit margins in the future.

In the first seven months, coal producers' profits surged 81.5 per cent year-on-year, while crude oil producers' earnings rose 74.7 per cent and profits of producers of non-ferrous metals jumped 136.4 per cent.

However, building materials producers' profits fell 17.3 per cent, and earnings for transport equipment manufacturers are down 38.6 per cent.

Power industry profits also dropped 1.5 per cent.

The statistics bureau said net losses stood at 122.8 billion yuan (US$15.1 billion), up 55.5 per cent.

Profits at State-owned firms and firms in which the State holds a majority stake grew 18.5 per cent year-on-year during the first seven months, while collectively-owned firms saw profits rise 29.1 per cent.

Earnings of shareholding companies rose 30.2 per cent, and private companies' profits were up 40.1 per cent.

However, profits of overseas-funded firms grew only 1.7 per cent.

Domestic media reports claimed some overseas-funded companies played down their profits to evade taxes.

Officials from the State Administration of Taxation estimate foreign-funded companies evade some 30 billion (US$3.6 billion) of tax every year.

(China Daily August 23, 2005)