Manufacturers' inventories reach record high

A total of 959 manufacturers listed in the A-share market saw their inventories reach a combined record high of 1.14 trillion yuan ($187 billion) by the end of the third quarter, roughly equivalent to the GDP of five provinces, indicating overcapacity in the manufacturing sector, a media report said Monday.

By the end of the third quarter, the total inventories of the 959 enterprises had increased by 6 percent year-on-year, and by 61 percent compared with the end of 2009, the Investor Journal Weekly newspaper reported, citing calculations by its research institution based on the companies' financial reports.

Li Jianming, deputy director general with the China Enterprise Confederation, ascribed the fast rise in inventories to the government's fiscal stimulus measures since the global financial crisis in 2008.

China unveiled a 4 trillion yuan economic stimulus package in 2008, and infrastructure construction became one of the major goals for local governments.

Manufacturing enterprises played a key role in the infrastructure construction in the past four years, but consequently saw fast growth in their inventories following the gradual withdrawal of the stimulus plans by the central and local governments, Li told the Global Times Monday.

Among the 959 enterprises, manufacturers of mechanical equipment, construction materials and electronic products saw the fastest growth in inventories, according to the report.

The three enterprises with the largest inventories are Sinovel Wind Group Co, China First Heavy Industries and China Erzhong Group (Deyang) Heavy Industries Co, with their inventories hitting 9.25 billion yuan, 8.04 billion yuan and 4.83 billion yuan, respectively, the report said.

Due to the large inventories, the three companies have suffered heavy losses, with Sinovel Wind reporting a loss of 700 million yuan in the first three quarters; China First Heavy suffered a loss of 440 million yuan during the period; and China Erzhong lost 1.5 billion yuan.

"It will take a relatively long time for these enterprises to digest their inventories, given the current economic conditions," Li noted.

China's producer price index (PPI), an indicator of inflation at the wholesale level, fell 1.5 percent in October year-on-year, according to the National Bureau of Statistics, marking a fall for the 20th consecutive month and indicating sluggish performance for industrial producers.