CHINESE factories continued to post shrinking profits in March, but the decline was less than in the first two month of the year as major sectors picked up, according to official data released yesterday.

    Profits earned by industrial firms fell 0.4 percent in March from a year earlier to 508.61 billion yuan (US$82 billion), the National Bureau of Statistics (NBS) said yesterday.

    That compared with a 4.2 percent year-on-year fall in the first two months of the year.

    For the first quarter of the year, profits declined 2.7 percent from a year earlier to 1.25 trillion yuan, the bureau said.

    The NBS attributed the narrower decline in profits last month to a deeper fall in raw material prices and lower financing costs after the central bank cut interest rates.

    Prices of raw materials fell 5.7 percent from a year earlier in March, 0.2 percentage points more than in the first two months of this year, helping profit margins, the bureau said.

    The producer prices index (PPI) contracted 4.6 percent in March from a year earlier, recent data showed.

    PPI has now been in negative territory for three years, highlighting sustained pressure on profit margins at Chinese companies — in particular heavy industry — as the economy slows. Oil processing, coking coal and nuclear fuel processing industries saw a 10.75 billion yuan rise in profits in March from a year earlier, versus a drop of 28.55 billion yuan year on year in January-February, partly due to the lagging effect of falling oil prices, it added.

    “Despite the narrowed decline in profits, the operational situation of industrial enterprises remained grave,” He Ping, an official at the bureau said in a statement.

    He warned of a grim outlook for industrial enterprises due to sluggish demand, slowing output, dropping prices and feeble growth in core business turnover.

    Enterprises will be also confronted with piling inventories and rising receivables caused by weak sales, He added.

    (SD-Agencies)