Profit growth quickens at China industrial firms.

Profit at Chinese industrial companies grew at a slightly faster pace in August,led by gains in earnings at mining and oil companies,government figures showed Thursday.Combined net income rose 20.7 percent from a year earlier to 864.3 bn yuan,or $ 107 bn,in the first eight months of the year,the Chinese National Bureau of Statistics said on its website.

 

Revenue rose 27.7 percent to 15 trillion yuan.Profit increased 20.6 percent in the first seven months.

 

"It's a steady increase and may suggest economic growth isn't decelerating too fast " said Zhang Le,an economist at China Merchants Securities in th e southern city of Shenzhen.He forecasts that the economy will expand 9.3 percent in 2005 after 9.5 percent growth in each of the past two years.

 

China is at the tail end of a two-year investment boom that drove raw-material costs higher and led to overcapacity in industries including steel,mobile phones and home appliances.
Producers of coal,copper and oil are still benefiting from higher prices.

 

Profit levels at the nation's coal-mining companies jumped 80 percent in the eight months through August and oil extractors' earnings surged 76 percent,the government said.

 

State control of retail prices of electricity and gasoline has squeezed profit at oil refiners and power producers,which only recently have been allowed to pass on higher coal and crude oil costs to consumers.Prices had been held down to keep inflation in check.

 

Profit at electricity generators rose 3.1 percent in the first eight months,while oil refiners had a loss of  8 bn yuan.Profit for China's steel makers rose 28 percent.

 

Tallying impact of fuel costs.

 

China's economy is showing " some negative impact " from record crude oil prices,a senior official from the nation's main economic planning agency said Thursday.

 

"Oil prices at current record levels will have some negative impact on the economy and all levels of society " said Xu Dingming,who heads the energy bureau at the National Development and Reform Commission.

 

Fist to be affected are Chinese farmers " who are paying more for their diesel " he said.

 

The national system of setting gasoline and diesel prices is ' showing some fault' and the commission is studying possible changes,Xu said.

 

The government controls fuel prices in China to avoid increasing inflation and manufacturing costs in the world's faster-growing major economy.The policy may have been the reason for fuel shortages in the country.the international Energy Agency said on Aug 11.

 

The National Development and Reform Commission allows fuel prices to fluctuate no more than 8 percent from the levels it sets.The commission raised the price of 90 RON grade gasoline in Guangdong Province by 16 percent this year to 4 yuan a liter.

 

The world's largest oil user behind the US,China is encouraging local companies to secure oil and gas supplies locally and abroad as energy prices reach all time highs

 

Oil rose to a record $ 70.85 a barrel on the New York Mercantile Exchange on Aug 30 and has climbed 40 percent from a year ago.

 

China's oil companies are expanding overseas as local fields fail to meet domestic demand,which more than doubled in a decade to about 6.75 m barrels a day,according to an estimate by the International Energy Agency.

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