2012-08-28

Good economic news from China

at least for the long-term. Almost all headlines are focused on the falling industrial profits, but ignoring the state-owned/private split that shows the private economy doing well.

Profits slide at China’s industrial firms, fuelling fears of wider slow-down
Profits for government-owned industrial enterprises fell 12.2 per cent in the first seven months of the year compared with the same period last year, while private sector profits rose 15.5 per cent, according to the National Bureau of Statistics.

The figures cover companies in fields such as steel and chemical production, manufacturing of autos, electronics and machinery, oil and natural gas and power generation.
China's state-owned companies dominate the industrial sector and most firms were losing money until the mid-2000s, when the tide of rising commodity prices finally lifted all boats. Due to the cyclical nature of the industrial sector, Chinese state-owned firms should once again head into a long slump, but this time it will lead to a larger debt crisis than the one seen at the end of the 1990s, thanks to real estate ventures and other wasted capital projects.

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