Sept. 27 (Bloomberg) -- Profits at Chinese industrial companies surged 37 percent in the first eight months from a year earlier, adding to funds that fuel investment in the world's fastest-growing major economy.

Combined net income rose to 1.6 trillion yuan ($213 billion), the National Bureau of Statistics said today. Sales jumped 27.4 percent to 24.5 trillion yuan.

Industrial profits are growing as production increases amid soaring exports and a more affluent domestic market. Rising incomes may help accelerate fixed-asset investment as Chinese companies finance expansion from retained earnings.

``Strong industrial production growth helps sustain profits,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong. ``When they earn more, companies will invest more as well.''

China's industrial production jumped 18.4 percent in the first eight months from a year earlier, accelerating from a growth rate of 16.6 percent in all of 2006.

China Coal Energy Co., the country's second-largest coal producer, this month said first-half profit almost doubled on increased output and prices. China Mengniu Dairy Co., the nation's biggest milk maker, said profit gained 41 percent in the first half from a year earlier as demand rose in the world's most populous country.

The central bank this month increased borrowing costs for a fifth time this year to slow factory spending that threatens to leave China with excess capacity.

Top Priority

Fixed-asset investment in Chinese urban areas climbed 26.7 percent in the first eight months from a year earlier, up from a 24.5 percent expansion for the whole of 2006. The number of new projects rose 18,665 to 149,751.

Premier Wen Jiabao this month said China's top priority is to prevent the economy from overheating, citing problems including rapid growth in fixed-asset investment, excessive loans and a big trade surplus.

Besides raising interest rates, the People's Bank of China ordered lenders to set aside larger reserves seven times this year and sold bills to limit cash available for investment.

China's economy, the world's fourth largest, expanded 11.9 percent in the second quarter from a year earlier, the fastest pace in more than 12 years.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

Last Updated: September 26, 2007 22:06 EDT