Industrial profits up in China

China Daily 2016-11-28

China’s industrial profit growth came in at 9.8 percent year-on-year in October, up from 7.7 percent the previous month, a positive sign for the country’s economic restructuring and macroeconomic stabilization.

The accelerated profit growth was attributable to the growth of sales revenues, rising producer prices and strong profit growth in the chemical, coal and general equipment sectors, the National Bureau of Statistics said in a statement.

China’s producer price index, which measures factory gate prices and indicates a level of economic activity, rose 1.2 percent year-on-year in October, up from 0.1 percent in September, showing improvement in domestic demand for industrial products, said NBS official He Ping in an article published on the ministry’s website.

The rising industrial profit level in October is a sign of improving balance sheets of enterprises, He said, noting that profit ratios of industrial enterprises rose and their costs dropped.

He said China’s supply-side structural reforms have made solid advancement as indicated by the October reading of industrial profits. The stock, leverage ratio and cost level of enterprises all dropped in October, he said.

In the first 10 months, total industrial profits expanded 8.6 percent year-on-year, faster than the 8.4 percent rise in the first three quarters, the NBS said.

Profits in the coal mining sector rose 112.9 percent from January to October year-on-year, while manufacturing profits rose 13.2 percent.

“Although October’s industrial profit growth picked up, the structure of growth has yet to improve,” He said.

“Profits in traditional raw materials production increased relatively quickly,” he said, adding that the profit growth in high technology and equipment manufacturing slowed.

According to Jiang Chao, chief macroeconomics analyst at Haitong Securities, “although industrial profit growth picked up in October, it is still lower than the level in July and August. The upstream industries, such as mining, saw improvement in profits, but the downstream sectors suffered.”

China’s economy has shown initial signs of stabilization, analysts said. For example, the manufacturing purchasing managers’ index, a key measure of economic vitality, rose to 51.2 in October, up 0.8 from the previous month.

Boosted by improving corporate profit situations and a stabilizing job market, China can meet its preset GDP growth target of at least 6.5 percent year-on-year for this year, according to Zhu Baoliang, head of the economic forecasting department of the State Information Center.