Experts said Chinese industrial enterprises have managed to cope with depressed domestic demand. China's domestic market shifted to a buyer's market in 1997 and had caused a price decline in industrial products.

The SSB report showed that losses in the country's industrial sector also reduced by 29.8 percent to 102.8 billion yuan last year from 146.4 billion yuan in 1999.

The changes were, by a large degree, attributed to the government's decision to change a tight fiscal policy to the active in 1998. The impact of the Asian Financial Crisis is also fading away, experts said.

China's industrial profit dropped to 145.8 billion yuan in 1998, the lowest level in its ninth Five-Year Plan period (1996-2000), according to the official statistics.

However, the domestic demand will remain weak for some time and this will be a major stumbling stone for industrial growth in the next five years, said an analyst.

Another negative factor may be the shift to a buyer's market since it has led to the surplus of many low-quality products, they added.

According to an official survey on 609 goods, the supply of 80 percent goods exceeded the demand in 2000.

The SSB report said that last year the industrial added value topped 3.9 trillion yuan, a rise of 62.6 percent over 1995, but the annual average growth rate jumped down 7.5 percentage points to 10.2 percent in the past five years, compared with the eighth Five-Year Plan period (1991-1995).

Out of the 6,599 large and medium-sized state-owned enterprises (SOEs) that are losing money, 70 percent were pulled out of the hole in 2000 and all SOEs and non-public enterprises with the annual sales income above 5 million yuan have a total assets of 12 trillion yuan, up around half over 1995.

The industry's internal restructuring also contributed to its good performance, an expert said.

According to the SSB's latest statistics, 21.4 percent of the country's enterprises are shareholding companies, increasing over 5 percent in 1995.

Solely state-owned enterprises accounted for 28.7 percent of all Chinese companies, jumping down from 47.1 percent five years ago, while the proportion of foreign-funded companies and those with investment from Hong Kong, Macao or Taiwan, increased by 11.2 percentage points.

Insiders noted that the SOEs still play a leading role in China's economy as the proportion of state-holding non-public companies climbed from 7.4 percent five years ago to 19.6 percent last year.

The Chinese government has closed a number of small factories, with poor equipment or that cause severe pollution, in some stagnant industries including textile, coal and metallurgy, which is an attempt to cut their surplus production capacity.

For example, the government shut down 150 sugar refineries with a total production capacity of 2.73 million tons in 2000.

Compared with the downturn of some traditional industries, high-tech companies boomed five years ago, the SSB report indicated.

Electronic and telecommunication equipment producers witnessed 1.9 times of growth in the past five years. And China have 6.72 million microcomputers in 2000, eight times over 1995.

(People' Daily 03/08/2001)