China Review News (CRN) recently published a report on the Ministry of Finance’s newly released numbers. The numbers showed that, during the period from January to May, the total profit of all state-owned companies declined 10.4% compared to the same period last year. The monthly decline from April to May was 11.8%. The Ministry expected a continuation of the decline in the near future. The report expressed the belief that the main cause of the decline was the combination of a weakened international market and low domestic demand. The domestic consumer market is very weak due to higher living costs. Another reason for the profit decline mentioned in the report was the disappearing benefits that resulted from the earlier large stimulation package that the government initiated after the global financial crisis started in the U.S. The report also identified three operational issues: (1) state-owned companies actually had a total income increase while suffering a total profit decline; (2) internal costs such as wages increased rapidly; (3) only companies with monopoly power saw their profits increase.
Source: China Review News, June 19, 2012