Major Chinese industrial companies' profits drop 5.2%

Profits for Chinese chemical producers, automakers and other major industrial companies fell 5.2 percent in the first two months of 2012 from the same period a year earlier, China's statistical authority said Tuesday.

Total profits for the largest industrial companies, or those with annual revenues above 20 million yuan (3.17 million U.S. dollars), stood at 606 billion yuan during the first two months, the National Bureau of Statistics said in a statement on its website.

The data highlighted the impact of the sluggish global economic recovery on Chinese companies, especially state-owned enterprises, as exports have slowed due to waning external demand.

The data also represents a significant drop from a 34.3-percent increase registered in the first two months of 2011.

State-owned and state-controlled enterprises saw their profits fall 19.7 percent from one year earlier to 179.1 billion yuan, while private companies' profits grew 24.4 percent during the same period.

Out of 41 industry categories, 23 reported a year-on-year increase in profits, while 14 saw profits fall and one broke even.

The ferrous metal sector was hit the hardest, with profits slumping by 94 percent. The computer, telecommunications and electronics manufacturing industries suffered a 40.8-percent drop in profits.

Oil refining, coking and nuclear fuel processing companies also saw profits turn to losses, according to the statement.

Profits in the power generation sector, however, increased by 21.1percent. The country's oil and gas exploration industry witnessed a 15.5-percent rise in profits.

"The data is within our expectations and will have a marginal impact on the stock market," said Wang Xiaomin, chief financial planner at Sinolink Securities.

The benchmark Shanghai Composite Index rose 0.2 percent to end at 2,355.29 points during Tuesday's morning trading.

The world's second-largest economy is facing an economic challenge in the form of slackened exports. The nation reported a trade deficit of 31.49 billion U.S. dollars in February, the largest monthly trade deficit in more than a decade.

China's economic growth slowed to 9.2 percent in 2011, down from 10.4 percent in the previous year. Authorities are targeting a 7.5-percent increase for this year's gross domestic product.

A preliminary gauge of Chinese manufacturing fell to 48.1 in March, the lowest in four months, according to a report released by HSBC last week, indicating a further slowdown in the country's manufacturing activity.

Peng Wensheng, chief economist at the China International Capital Corp., said the company cut its first quarter economic growth forecast to 8.5 percent from 8.7 percent as domestic demand softened.

Analysts said they anticipate fresh policy support from the government to buoy the economy.

Last month, the central bank lowered the reserve requirement ratio for banks by 50 basis points, the second cut in three months, to ease the short-term credit crunch and secure growth.

"I expect two additional 50-basis-point cuts to the reserve ratio over the rest of the first half," said Li Jing, managing director of JP Morgan Chase in China.