HI Results Sound Good    

According to a report from a securities research organization, as of August 24th, 131 publicly listed companies in the petroleum and chemical industry disclosed their half year results ending June 30th. These 131 companies earned a combined profit of RMB39 billion in the first half, increasing 96.48% over the same period last year. Of that, RMB25.7 billion was reported in the second quarter. Fifty four companies enjoyed a growth in profits while 37 companies reported losses.     
    Analysts suggest that the high growth in profit was mainly driven by the policies the government executed. The active financial policies and loose money policies created a good investment and consumption climate for the development and recovery of the petrochemical industry. The adjustment and stimulation program helped accelerate construction of major petrochemical projects and reinforce confidence.   
   Sinopec Corp. (SH: 600028) also posted a growth of 332.6% in net profit in the first half while a drop of 27% in sales. Although the company explained that the difference changes between sales and profits was caused by the low level in the same period of 2008, the reduced cost of purchasing crude oil and the new oil products pricing policy executed this year, it was criticized by media and some analysts, some of them thought Sinopec should return the high profit to domestic citizens.    
   China's rubber industry is facing a strict challenge because the US's proposed tariff for China-made tires will be decided in September. One third of China's tire manufacturers suffered losses in the first half. If the proposal is approved, more tire plants will be closed; furthermore, China will not need to import rubber. More and more experts are calling on the government to take retaliatory measures in other industries.  
   Premier Wen Jiabao recently warned that the economic conditions are still complicated and serious, with many uncertainties. He required officials and enterprise managers to hold a clean and correct attitude in judging the current situation and making decisions, and required the related governmental departments to continue to execute the active financial policies and the moderate policies of loosening money. Despite a little recovery, no one should feel comforted.  
   While China's economists blamed the softened exports for some problems, WTO released a statement on August 24th that China's exports ranked first worldwide in the first half, exceeding Germany by US$100 million.
   Recently, Li Yizhong, minister of Industry and Information Technology (MIIT), announced that the MIIT will accelerate the merging and regrouping of enterprises, the elimination of outdated production capacity, energy conservation, pollution and consumption reduction.

Zhong Weike
August 27th, 2009