Thursday, October 27, 2016

China September Industrial Profit Growth Slows, Signals Fragile Recovery

Reuters
October 27, 2016

Profit growth in China's industrial firms slowed in September from the previous month's rapid pace as several sectors showed weak activity, suggesting the world's second-biggest economy remains underpowered despite emerging signs of stability.

Profits in September rose 7.7 percent to 577.1 billion yuan, slowing sharply from August's 19.5 percent jump, according to data released by the National Bureau of Statistics (NBS) on its website on Thursday.

Profits in industries such as electronics, steel and electricity were hit by a significant drop in growth, He Ping, a NBS official said in a note accompanying the data.

The August profit growth marked the fastest pace in three years, helped by Beijing's spurge on infrastructure projects and a booming real estate industry.

Low base effects from the stock market crash in 2015 faded in September, the NBS said.

Total profits for the first nine months stood at 4.64 trillion yuan ($684.77 billion), up 8.4 percent from the same period a year ago, the same pace as in the January to August period.

Recent indicators showed China's economy was stabilizing, as it grew 6.7 percent in the third quarter from a year earlier, same from the previous quarter, as increased government spending and a property boom offset stubbornly weak exports.

But industrial overcapacity, mainly in the traditional sectors, have been a drag on profits in recent months and analysts say the outlook for earnings in the sector could hinge on the progress made by policy makers to cut capacity.

Beijing has embarked on a campaign to cut capacity in the coal and steel sectors in the economy's most significant transformation in two decades.

Chinese industrial firms' liabilities at the end of September were 4.7 percent higher than at the same point last year.

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


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