Profits at major state-owned enterprises (SOEs), a main source of funding for new investments, jumped almost 35% in the first four months of the year, the Hong Kong Standard reported. Some 424 state companies reported combined profits of US$45.6 billion, up 34.7% from the same period a year ago, according to state media reports. Profits at SOEs provide the liquidity that allows for investment in fixed assets, a key indicator of state-funded spending on major infrastructure and production capacity. However, the Chinese government is struggling to keep new investments under control to avoid speculative bubbles and overcapacity, but these drastic profit increases could hinder attempts to rein in investment growth by curbing loans to enterprises, as companies may instead rely on retained profits.
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