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November 28, 2016

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Rising sales lift industrial sector profits

PROFIT growth in China’s industrial sector picked up last month, boosted by stronger sales and higher prices.

The figures suggest further strengthening of the world’s second-largest economy, though growth was skewed toward high-polluting heavy industry.

There has been widespread speculation in China’s commodities futures market this year, with coal prices hitting records in recent weeks, but economists warn growth driven by loose money policies won’t last.

Indeed, a subdued property market is expected to be a drag on growth in the first two quarters next year, as policy-makers introduce curbs to cool home prices, which could hit profits of firms making construction materials.

Industrial profits in October rose 9.8 percent to 616.1 billion yuan (US$89.1 billion), the National Bureau of Statistics said yesterday. Profits in September rose 7.7 percent.

Industrial profits rose 8.6 percent in the first 10 months from the year-earlier period, similar to an 8.4 percent growth rate in the first nine months of the year.

Profits in the coal mining sector rose 112.9 percent for January-October from the same period a year earlier while manufacturing profits rose 13.2 percent.

“Although October industrial profit growth picked up, the structure of growth was not ideal,” He Ping, a National Bureau of Statistics official, said in a statement.

“Profits in traditional raw material production increased relatively quickly, while high technology and equipment manufacturing profit growth slowed,” He said.

Profit growth was overly reliant on rising prices, and industrial firms needed organic improvement to see better results, He added.

Profits for iron and steel production and processing companies rose 310.2 percent in January-October.

China’s producer prices jumped more than expected last month as prices of coal and other raw materials surged in the midst of a supply crunch and a pick-up in the economy. The producer price index is also expected to stay positive in coming months.

Chinese industrial firms’ liabilities at the end of last month were 5.1 percent higher than a year earlier.

The data covers large enterprises with annual revenues of more than 20 million yuan from their main operations.

Profits at state firms rose 0.4 percent in the first 10 months of this year from a year earlier, marking the first increase in year-to-date earnings for state-owned companies this year, the finance ministry said on Friday.

China’s industrial profits have rebounded strongly this year after falling last year, boosted by a recovery in commodities prices.


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