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October 28, 2016

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China’s industrial profit growth slows

GROWTH in China’s industrial firms slowed in September from the biggest monthly rise in three years due to the waning effect of a low-base effect and a campaign to cut capacity.

Profits in September rose 7.7 percent to 577.1 billion yuan (US$85 billion), slowing sharply from August’s 19.5 percent jump, the National Bureau of Statistics said on its official website yesterday.

Industrial profits in the first three quarters rose 8.4 percent from a year earlier to 4.64 trillion yuan, same as the growth figure in the first eight months.

The month-on-month easing was partly because profits in general in August 2015 were especially weak due to the stock market crash, while industries such as electronics, steel and electricity suffered a drop in profit growth, said bureau official He Ping in a separate note.

However, the state-owned enterprises sector “is doing well,” said Zhou Hao, an economist at Commerzbank AG, as profits of the SOEs soared 47.6 percent in September, exceeding a 39.4 percent growth in August.

Ferrous metal production including steel led the profit growth with a 272.4 percent jump in the first nine months from a year ago, followed closely by a 263.8 percent surge for oil refining companies.

Yet the bureau said in a statement that foreign and domestic demand remains weak and coal and steel companies have taken on more debt.

“The biggest challenge facing companies is to strike a balance between cutting debt and making a profit,” said Commerzbank’s Zhou.


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