鄭玉歆 李玉紅

I. Introduction

Since 1998, Chinas industrial enterprise profitability has experienced tremendous growth, reversing profit declines. In 2005, Chinas industrial sectors registered a 9-fold (RMB 1.3 trillion) and 2.4-fold (RMB 1 trillion) increase in profits over 1998 and 2000 respectively. Indeed, the study of Chinas returns on capital has emerged as a hot topic of discussion in academic communities, grabbing worldwide attention (World Bank, 2006; Dan Weijian, 2006; Xiao Geng, 2006; Bai Chongen 2007; Song Guoqing 2007). Whether or not Chinas rate of return, or ROR, is high or low remains a topic of debate. Nevertheless, it is undeniable that the profitability of industrial enterprises has increased since 1998. To illustrate this point, one only needs to refer to the fact that Chinas industrial pro.t margin, measured by pro.ts divided by costs and expenses, rose from 2.35% in 1998 to 6.42% in 2005.