"Profitability of the industrial sector improved, the downward trend in business profits eased and progress was made in matching production and sales," the bureau said in a statement.

The composite index measuring overall profitability of industrial businesses rose by a slim 0.9 of a point from a year earlier to 117 points and was 4.3 points up on the first quarter, it said.

Despite the improvement in business profitability, overall industrial profits - after the deduction of total losses in the sector - continued to shrink.

They slumped to 123.8 billion yuan (US$14.9 billion), 2.4 percent down from the same period last year.

But the fall in profits was not as sharp - from a much faster 9.1 percent decline in the first quarter.

China's gross domestic product grew by 7.6 percent in the first quarter, reversing a nearly year-long slowdown.

But economists warned falling industrial profits may pose a threat to this year's economic growth target of 7 percent.

There were relatively strong increases in profits in the sectors of mining, tobacco, transport equipment manufacturing and pharmaceutical production.

(China Daily May 25, 2002)