china

CHANGCHUN, Sept. 5 (Xinhua) -- Concern over surging oil prices could mean the restructuring and upgrading of China's industries, according to a United Nations Conference on Trade and Development (UNCTAD) official here on Friday.

"Commodity price hikes have severely affected the Chinese economy, but they also occurred as China faces industrial restructuring challenges," Li Yuefen, the UNCTAD Debt and Development Finance Branch head, said.

Rising commodity prices and wages have made it increasingly difficult for China to sustain a competitive export edge, she added.

A slow global economy is another challenge.

The Geneva-based agency released its annual Trade and Development Report (TDR) in Changchun, the northeastern Jilin Province capital. The world economy is forecast to grow 2.9 percent this year, 0.9 percentage point less than last year, according to the report.

"In mid-2008, the global economy is teetering on the brink of recession," Li said. The downturn after four years of relatively fast growth was due to a number of factors.

These included the ongoing financial crisis, high commodity prices and tight monetary policies in several countries. China also faced a weak and volatile stock market.

Despite a slowdown, output growth in China this year was expected to expand about 10 percent, said Detlef Kotte, an UNCTAD Macroeconomic and Development Policies Branch official. That growth is dependent on oil prices and might lead policy makers to restructure Chinese industries.

Li recommended cutting oil use and upgrading manufacturing technology.

The full TDR report is at www.unctad.org.

The report's release took place amid the 4th Northeast Asia Investment and Trade Expo here.

Nobel economics prize winner Robert Mundell told a forum that China's economic growth would not stay at 11 percent for long, but it was destined to be 8 percent for the next 15 to 20 years.

China's GDP growth rate was 11.4 percent last year. GDP grew by10.4 percent in the first half, down 1.8 percentage points year-on-year.

Mundell predicted that China's GDP would overtake that of Japan by 2012, surpass Europe in 2030 and exceed that of the United States in 2050.

Asked about the economic impact of the Olympics, Kotte said it would be reflected in a boost from infrastructure projects. There would not be a post-Olympics slowdown as some infrastructure projects were still under way and China was a large economy, Kotte added.

He said the Games would "also help foster a positive image" of China around the world, which would attract investment and tourism.

High crude oil prices may hinder China's refiners but they benefit some of the country's oil producers. China's biggest offshore oil and gas producer posted a better-than-expected first-half profit, while its top two refiners saw first-half profit plummet by more than expected.

Beijing's regime of uneven price controls allows China National Offshore Oil Corp. (nyse: CEO - news - people ), or CNOOC, to sell crude at high market-set prices to refining giants PetroChina (nyse: PTR - news - people ) and Sinopec (nyse: SNP - news - people ), which sell finished oil products to domestic consumers at state-controlled prices. With current high global oil prices, "upstream" producers will earn more with higher production while "downstream" operators will lose money as they increase output.

CNOOC's first-half profit soared a record 89.3%, compared with last year's corresponding period, to hit 27.5 billion yuan ($4.0 billion), news that sent shares over 7% in New York. CNOOC boosted output and profited from crude prices up 63.0% compared with a year ago.

Meanwhile, PetroChina's first-half profit fell 35%, compared with last year's corresponding period, to 53.6 billion yuan ($7.8 billion). The half-year decline, also due to the high price of crude, is the firm's steepest since 2001. Sinopec earlier reported that first-half profit fell by 77% (See " Sinopec Keeps Chin Up Despite Grim Outlook").

CNOOC ramped up production by 8.3%, compared with last year's similar period, to 92.4 million barrels, and the average price fetched soared 74.3% to $102.49 a barrel. CNOOC aims to boost output by 18% this year.

Despite a production boost, PetroChina's refining business lost 59 billion yuan ($8.6 billion), as Beijing kept pump prices artificially low to combat inflation. Sinopec Chairman Su Shulin said Tuesday that "the worst is still not yet past," according to the Shanghai Securities News. Beijing hiked retail gas prices for the second half of the year and is likely to raise them further, giving a boost to refiners, but the government will also roll back subsidies to those same firms.

In early-afternoon trading in New York, CNOOC's American Depositary Receipts were up $10.80, or 7.41%, to $156.51. PetroChina's ADR's were up $1.91, or 1.50%, to $130.31.