Profits surge at industrial firms

PROFITS at China's industrial companies rose 36.7 percent in the first 11 months from a year earlier, the National Bureau of Statistics said yesterday.

Analysts were quick to say the profit surge may make it harder for the government to tame the investment boom and prevent the economy from overheating.

Combined net income at industrial companies climbed to 2.29 trillion yuan (US$309 billion) through November, while sales jumped 27.6 percent year on year to 35.5 trillion yuan, said the bureau.

It was led by privately-owned firms, which posted a profit jump of 50.9 percent to 400 billion yuan.

Foreign enterprises, together with Hong Kong, Taiwan and Macau companies, saw profit increase 34.3 percent to 612.6 billion yuan.

"The government's stiffer measures to cool the economy require time to take effect. But mounting industrial profit may put the government under more pressure to divert the economy from investment and trade," said Li Maoyu, an analyst with Changjiang Securities Co.

On December 20, the People's Bank of China adjusted interest rates for the sixth time this year. On December 8, the central bank ordered lenders to set aside more capital as reserves at the central bank, the 10th increase this year.

However, the tighter credit controls have not had a substantial impact on the world's fastest growing economy, which fears a sudden slowdown may cost jobs and leave factories idle.

In the first 11 months, urban fixed-asset investment rose 26.8 percent from a year earlier to 10.06 trillion yuan, while the industrial output increased 18.5 percent year on year through November.

"All these industrial barometers show that growth rates are still running in the fast lane. More monetary measures are expected to tame the investment," said Li.

He forecast China may raise interest rates another four or five times in 2008.