China's Industrial-Company Profit Growth Slows as Economy Cools

Chinese industrial companies' profits rose at one seventh of the pace of a year earlier as the economy cooled and commodity prices plunged.

Net income increased 4.9 percent in the first 11 months of 2008 to 2.41 trillion yuan ($353 billion), the statistics bureau said today. Profits advanced 36.7 percent a year earlier.

The world's fourth-largest economy grew at the slowest pace in five years in the third quarter as the global financial crisis cut demand for exports and companies reduced output. Overcapacity in almost all industries and ¡°unprecedented¡± drops in some commodity prices may hurt profits further, Li Yizhong, head of the nation's industry regulator, said this month.

¡°The double-whammy of cooling demand and plunging prices have caused company profits to worsen seriously,¡± said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. ¡°Profits may shrink as much 15 percent over the next six months.¡±

China's policy makers are concerned that a slowing economy, combined with falling profits, will prompt companies to shed more workers, raising unemployment and fomenting social unrest.

In 2008 more than 10 million migrant workers had lost their jobs as of the end of November, Caijing Magazine reported Dec. 17, citing an unidentified labor ministry official.

State-owned companies should avoid firing workers next year Li Rongrong, head of the State-owned Assets Supervision and Administration Commission said yesterday.

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