TO THE POINT: In April, the Chinese stock market continuously broke record highs, leaving many doubting the sustainability of stock prosperity. However,first-quarter reports from 941 of the Shanghai and Shengzhen listed A-share companies show profits up 100 percent compared with a year ago. These figures are driving the fast development of the Chinese stock market and reassuring investor confidence. In sharp contrast with investor confidence in the stock market, the Chinese central bank is being extremely cautious about the volatile market and excessive liquidity. For the fourth time this year, the central bank lifted the reserve requirement ratio by another 0.5 percent, up to 11 percent, in an effort to cool the supposedly overheating economy. There’s good news for multinationals. They will be allowed to conduct internal foreign exchange trade in the next few months, thanks to an ease on restrictions by the Chinese foreign exchange watchdog. To achieve balanced development, the government is determined to launch the large-scale development of central China, building new airports and attracting more businesses to boost the economy there. Regarding the IT industry, Huawei Technologies is the biggest winner, having sold 29.778 billion yuan worth of software, followed by ZTE.

By LIU YUNYUN

Outperforming Expectations

People may have every reason to condemn bubbles in the stock market, but the latest listed companies’ quarterly reports have reassured investor confidence.

By the end of April 28, 1,028 companies, about 70 percent of those listed on the Shanghai and Shenzhen stock exchanges, have filed their first quarter financial statements. Of these, 941 have reported average profit increases of more than 100 percent compared with the same period last year. As for the remaining 87, these were listed after 2006, and have no records to compare.

The combined turnover of the 941 companies reached 962.75 trillion yuan ($125 trillion) in the first quarter, up 26.8 percent year on year. The net profits of those companies were as high as 67.87 billion yuan($8.8 billion), double from a year ago.

From the perspective of different industries, infrastructure related industries such as petrochemical, iron and steel and machinery boasted the highest profit growth, helping shore up investor expectations on all listed companies and in the stock market.

The sound economic performance of listed companies marks a good beginning to the year, and is partly due to the prosperous development of the overall economy. After the split share reform, investors big and small have discovered that they share common interests, which helps boost productivity. The capital injection and stock incentive system also contributed to the performance of listed companies.

Money Freeze

The People’s Bank of China, China’s central bank, is very determined. It raised the country’s reserve requirement ratio for the fourth time this year-up another 0.5 percentage points to 11 percent, taking effect on May 11-reducing the money available for lending by banks.

China’s first quarter GDP grew 11.1 percent. Li Xiaochao, Spokesman of the National Bureau of Statistics (NBS), said recently that the Chinese economy faces the risk of shifting from relatively fast growth to overheating.

The frequent reserve ratio adjustments show that the central bank is trying to contain the boom in lending and real estate development, which is believed could ignite inflation or a debt crisis.

The fourth adjustment comes on top of repeated interest rate hikes and investment curbs imposed on real estate, auto manufacturing and other industries over the past year.

“The increase is aimed at stepping up liquidity management of the banking system and to guide a reasonable growth of credit,” the central bank said on its website.

However, these efforts have had limited success in slowing the growth of investment. Fixed asset investment jumped 23.7 percent in the first quarter. In March, property prices in major cities like Beijing and Guangzhou rose over 9 percent from a year earlier period.

Li acknowledged that the Chinese Government would take more small steps rather than drastic cooling measures to ensure stable and fast economic growth.