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Profit growth slows sharply at China's state firms

BEIJING, March 20 (Reuters) - Annual profit growth at China's state firms slowed sharply to 2.8 percent in the first two months of 2014, official data showed on Thursday, adding to signs that the world's second-largest economy is faltering in the first quarter.

State-owned non-financial companies made combined profits of 326.5 billion yuan ($52.69 billion) during the January-February period, up 2.8 percent from a year earlier, the Ministry of Finance said in a statement on its website, www.mof.gov.cn.

The profit growth slowed from the annual rise of 5.9 percent in 2013 and 9.7 percent in the first two months of last year.

The slowdown was in line with other softening economic data with growth in investment, retail sales and factory output all falling to multi-year lows in the first two months.

Firms owned by the central government post an annual profit rise of 3.9 percent in the first two months of 2014, while companies owned by local governments reported a drop of 2 percent, the ministry said.

Companies in transportation, steel, nonferrous metal and chemicals suffered losses in earnings between January and February, while those in light manufacturing, coal and petrochemical industries saw relatively large year-on-year profit drops, it said.

Still, firms in property development, automobiles, electronics and mechanical industries reported strong year-on-year profit growth.

Meanwhile, total assets of state firms rose 10.8 percent in the first two months of 2014 to 92.3 trillion yuan, while debt increased 11.3 percent to 59.8 trillion yuan.

China's state firms retain their dominance in China's key industries even though the government has long promised to allow in private investment to boost economic growth.

($1 = 6.1965 Chinese yuan)

(Reporting By Xiaoyi Shao and Kevin Yao)