China Economic Watch: State Firms' Profits Plunge 16% in 1H; Economy Predicted to Continue Cooling in Q3

State Firms' Profits Plunge 16% in 1H
Central government-owned enterprises, China's largest companies, posted ¥10.57 trillion in revenues and ¥387 billion in net profits for 1H 2012, up 9% and down 16.4% respectively from the same period a year ago, the State-Owned Assets Supervision and Administration said. Rising operating expenses were blamed for the sharp decline in earnings.

Economy Predicted to Continue Cooling in Q3
China's economic expansion may slow to 7.4% between July and September, signaling the world's second largest economy has yet to bottom out, argued Song Guoqing, a central bank adviser. He also warned that a decline in producer as well as consumer prices may hurt industrial earnings and therefore discourage businesses from expanding. China's economic growth slowed to 7.6% in Q2; and premier Wen Jiabao warned of a gloomy economic outlook last week.

Industrial Production to Rebound in 2H
China's industrial production will start to recover during the transition between Q3 and Q4, and the growth rate will be around 10.7% for the whole of this year, according to the Ministry of Industry and Information Technology's research body. Opportunities ahead will be government stimulus and incentives, and challenges will be lingering weak foreign demand.

Stock Trading Fees to Be Cut 20%
China will further lower transaction fees on stock trading by around 20%, the securities regulator said, adding that details were being mapped out and would be released in September. Yao Gang, deputy director of the China Securities Regulatory Commission, said the policies are meant to promote the sound development of the capital market in the long run, not to a short-term bullish market.

Logistics Revenue Up 14% in 1H
Major companies in the logistics industry saw their revenues and costs grow 14.1% and 14.3% year on year respectively in the first five months. The logistics industry's output expanded 10.3% year on year to ¥1.6 trillion, representing 7.2% of gross domestic product and 16.6% of the service sector.

Shanghai's Economy Expands 7.2% in 1H
The gross domestic product of Shanghai, China's largest city economy, grew 7.2% year on year to ¥955.22 billion in 1H 2012, the local statistics bureau said. The secondary sector's output was up 3% to ¥374.46 billion and the tertiary sector's output was up 10.3% to ¥576.57 billion.

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