Chinese state industry profits drop 6.9% due to economic downturn

BEIJING (AP) - Total profits for China's biggest state-owned companies fell 6.9 per cent in the first 11 months of 2012 as an economic slowdown deepened, the government reported on Thursday.

The squeeze even for the biggest, politically favoured Chinese companies highlighted the severity of the country's worst economic downturn since the 2008 global crisis.

Economic activity re-bounded late in the year but analysts say a recovery is still shaky and will be gradual and weak. Growth fell to 7.4 per cent in the three months ending in September and is believed to have strengthened in the final quarter.

The Cabinet agency that oversees China's 116 biggest state-owned companies said they had total profit of 1.7 trillion yuan (S$335 billion) in the year through November. Those companies include PetroChina Ltd., Bank of China Ltd., China Mobile Ltd. and other major corporate names.

That was an improvement over the 16.4 per cent decline in profit reported for the same companies in the first half of the year.

Despite weaker profits, total assets at the major state companies increased 15.1 per cent to 69 trillion yuan, according to the State-Owned Assets Supervision and Administration Commission.

The wealth of major state companies has fueled public frustration. The companies receive low-cost bank loans, energy and other resources and many are monopolies or quasi-monopolies.

Communist leaders say China needs to build up such companies as economic champions but consumers complain about high prices and poor service.

China's expansion is still far more robust than Western economies or Japan but its companies have come to depend on unusually high growth to stay profitable.

State companies are far healthier financially than retailers, builders and other private sector companies. They say revenues fell by as much as half last year.