For the first 5 months of 2008, 80,500 manufacturing enterprises in China's large machinery industry realized sales revenue of Rmb3.788tn, an increase of 30% yoy which was basically the same with last year; total profit: Rmb222.5bn, rising 34% yoy which was 14ppt lower than last year. For the first half of 2008, 118 listed companies in the machinery industry achieved operating income of Rmb155.4bn, climbing 28.34% yoy; total profit: Rmb14.103bn, up 16.57% yoy, which was significantly lower than the industry average. Reasons for the slowdown of profit growth: 1) decelerated global economy and substantially decreased demand; 2) rising costs and squeezed profit. We believe that China's machinery industry will still face a more severe situation in the second half of 2008 under the pressure of costs and demand.