The index tracking the performance of Shanghai corporations is expected to drop 4.4 percent this quarter, as increasing business costs and raw material prices curb companies' profits.

　　The shanghai Statistics Bureau forecast in a report yesterday that Shanghai's corporate performance index will drop 6.6 points this quarter from last quarter's 151.1 points.

　　According to the bureau's survey, about 40 percent of local companies are pessimistic about the prices of raw materials and fuel. They believed that the price hike will continue this year.

　　"As the supply of manufactured products remains larger than demand, most industrial products will maintain low prices this year.

　　Thus the higher raw material prices will curb investors' profits," said Chen Jianhao, researcher of the Shanghai Academy of Social Sciences.

　　Meanwhile, the increasing business costs, including land prices and office rentals, are major concerns of local company managers.

　　The bureau's survey showed 17 percent of local companies regarded the business costs as "too high to tolerate," while about 57 percent of the companies surveyed said the costs are "rather high, but they can tolerate." Some 25.14 percent of them said they are "common."

　　Only 0.72 percent of them said they are not high.

　　"The small companies will face higher risks when their management cost keeps increasing," said Yao Junwu, secretary general of the Shanghai Entrepreneurs Association.

　　Yao noted that the beginning of year usually saw lower sales, but they should recover in the coming quarters.

　　The business performance of all the eight sectors surveyed is predicted to fall.

　　Among them, the construction industry may face the most difficult time.

　　"After the Spring Festival, prices for construction materials like cement surged. That put much pressure on us," said Jiang Jiangong, general manager of China Jiangsu Construction Group's Shanghai Branch.

　　"The steel price, for instance, surged about 500 yuan (US$60) per ton in a month," he said. "If the contract price stays unchanged, we will surely see profits shrink."

　　In some cases, the construction companies chose poor quality materials to lower their cost. "It's dangerous for the whole industry," Jiang said.

　　The real estate industry, which has blossomed for three consecutive years, is also projected to see an adjustment this quarter.

　　The index tracking its corporate performance is expected to edge down 0.9 point to 168.8 points.

　　Separately, demand for labor will fall to negative this quarter, the bureau said. Jobseekers have found Shanghai the worst place to find a job, the bureau said. University graduates saw a 40 percent drop in salary offered to them last year compared with that of graduates in 2002.

　　Nationwide, the performance index of domestic companies is expected to edge down 3 percent to 132 points this quarter, the National Bureau of Statistics reported yesterday.

　　The manufacturing, construction, accommodation and catering, and real estate industries are projected to see a drop in their corporate performance index.