Industrial Profits

From January to June, the total volume of profits made by all state-owned enterprises as well as non-state enterprises with annual sales revenue of more than 5 million yuan (enterprises above designated size) stood at 810.7 billion yuan, expanding 28 percent compared with the same period last year, according to the National Bureau of Statistics (NBS) (see graph 1).

Of the 39 major industrial sectors, industries like oil and natural gas exploitation, non-ferrous metals and manufacturing of transportation equipment registered high profit growth (see graph 2). At the same time, profits made by the iron and steel sector dropped 20 percent and the sector of petroleum refining and coking suffered 27.7 billion yuan of losses.

In the first six months, taxes paid by enterprises above designated size arrived at 625.1 billion yuan, growing 23.3 percent compared with the same period last year. Of the total, state-owned and state-holding enterprises contributed 355.3 billion yuan, up 18.3 percent from a year ago.

Sales revenue generated by enterprises above designated size reached 13.9 trillion yuan, rising 26.8 percent over the year-earlier period. Of this, state-owned and state-holding enterprises accounted for 4.65 trillion yuan, expanding 20.2 percent on an annual basis.

As of the end of June, stockpiles of finished products in all these enterprises were 1.35 trillion yuan, an increase of 16 percent compared with the same period last year. Of the total, state-owned and state-holding enterprises finished 369.8 billion yuan, up 10.5 percent year on year. The overdue receivables in these enterprises arrived at 2.92 trillion yuan, jumping 19.9 percent. State-owned and state-holding enterprises accounted for 754.7 billion yuan of the total, up 8.1 percent.

Energy Consumption

In the first half, the national energy consumption per 10,000 yuan of GDP inched up 0.8 percent year on year, according to the NBS (see graph 3).

The situation is not promising for regions and major industries to cut down their energy consumption, and will be a very challenging task for them to attain this year's goal, said the NBS. Therefore, all regions and departments should adopt an accountability system for energy conservation, in accordance with the State Council's requirements. Such a system should vigorously promote structural adjustment with a focus on energy saving for key industries and the 10 energy-saving projects, as well as enhance energy-saving management of enterprises.

Construction Industry

In the first half, all the construction enterprises (refer to those construction enterprises with overall or professional contracting qualification, excluding those sub-contractors in labor services) achieved output value of 1.49 trillion yuan, a year-on-year increase of 23.8 percent, according to statistics released by the NBS.

The total floor space of housing under construction by these enterprises was 2.63 billion square meters, expanding 19.7 percent compared with the year-earlier period.

Their total income was 1.3 trillion yuan, up 26.1 percent from a year ago. The total profits reached 23.4 billion yuan, surging 53.6 percent year on year.

Commodity Market

In the first half, China's commodity market continued to grow at a brisk speed, featuring an overall supply-demand balance, widening price gaps, rising costs of production materials and growing impacts on downstream products by energy price hikes, according to a report released by the Ministry of Commerce (MOFCOM).

The main features of the commodity market are as follows:

The consumer goods market grew rapidly and the gap between urban and rural areas narrowed. In the first six months, retail sales of consumer goods amounted to 3.6 trillion yuan, up 13.3 percent year on year, 0.1 percentage point higher than the rate in the same period last year. The turnover of China's 1,000 key commercial enterprises increased 16.3 percent. Of the total, retail sales of department stores increased 15.7 percent and those of hypermarkets, 17.6 percent. The rural market boomed and the gap with the urban market narrowed. In the first five months, retail sales of rural market went up 11.7 percent year on year, 1 percentage point higher than the rate a year ago.

Sales of production materials increased steadily and the overall balance between supply and demand remained. From January to June, sales of production materials totaled 8.2 trillion yuan, up 19 percent over the year-earlier period, 2.8 percentage points higher than that in the same period last year. Supplies of 30 major production materials increased 17.1 percent on average, 3.8 percentage points higher than the same period last year. Thanks to the pricing leverage, the balance between supply and demand improved and shortages of refined oil were eased. The oversupplies of coke, iron ore, aluminum and concrete were reduced.

Price hikes of consumer goods remained steady and prices of production materials increased month by month. The consumer price index climbed 1.3 percent year on year in the first half of 2006, while prices of production materials went up 1.1 percent.

Exports and imports maintained fast growth. According to the customs statistics, China's total foreign trade volume in the first half was $795.74 billion, up 23.4 percent. Of the total, exports stood at $428.59 billion, up 25.2 percent, and imports reached $367.15 billion, up 21.3 percent. The thriving foreign trade played an active role in lessening shortages of raw materials in the domestic market and promoting rational resource allocation.

But the development of the commodity market still faced some problems.

Due to expanding investment, demand for energy and raw materials remained strong. From January to June, fixed assets investment in urban areas surged 31.3 percent. The fast increase in investment drove up demand for major production materials, leading to continued increase in market prices and further aggravating the supply-demand imbalance and overcapacity.

The effects of price hikes of raw materials on downstream products became increasingly evident. Since 2006, due to high prices of energy and industrial production materials, as well as growing transportation and labor expenses, the costs of some light industry products have continued to increase and drove up prices of downstream products, such as electrical appliances.

Affected by the fast increase in expenditures for education, health care and housing in addition to an upward price adjustment of public services in recent years, household consumption was tepid in both urban and rural areas, especially for those people with low incomes.

MOFCOM predicted that retail sales of consumer goods would total 7.5 trillion yuan in 2006, up 13 percent from 2005 and the consumer price index would rise 2 percent for the whole year.

According to MOFCOM's estimate, in the second half, demand for production materials would remain strong and market prices would remain high. Total sales of production materials in 2006 are estimated at 17 trillion yuan, up 16 percent.