Rising costs pull down profitability in China

01-Sep-05

Much slower growth in profits than in turnover was the main feature reflecting the performance of Chinese companies H1-2005, based on the interim results of 1,386 of all the 1,390 companies listed on the Shanghai and Shenzhen stock exchanges. Total net profit posted by all of them was up by 4.17% over H1-2004. This small growth rate was based on a more than 20% surge in main operating turnover, implying that the listed companies are under great pressures of cost rise. Main operating turnover grew 23.87% in H1-2005, while their main operating cost surged 27.60% in the corresponding period, outgrowing the turnover growth by nearly 4 percentage points. Despite this slide in profits, the net cash flow of the listed companies, a key indicator measuring profit making quality, surged 48.64%, indicating that the companies could make better profits in the future