Picture brightens for corporate profits

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Picture brightens for corporate profits

By HE WEI (China Daily) 13:51, September 28, 2013

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BEIJING, Sept. 28 (Xinhuanet) -- The net income of China's industrial companies gained traction in the first eight months, offering further evidence of economic stabilization.

Aggregate industrial profits rose 24.2 percent year-on-year in August alone to 483.2 billion yuan ($78.95 billion), more than double the growth rate of 11.6 percent in July, the National Bureau of Statistics said on Friday.

For the first eight months, industrial profits rose 12.8 percent to 3.49 trillion yuan, the NBS said on its website.

The figures come after the HSBC/Markit flash Purchasing Managers' Index for August, the earliest monthly indicator of China's industrial activity. The PMI staged its strongest rebound in six months, supported by new orders and exports.

Among the 41 industries tracked, 25 achieved profit growth and 14 reported a profit drop in the first half of the year, compared with the year-earlier period, the NBS said.

Profits from industrial companies' core businesses climbed 4.9 percent in the first eight months, slowing from 5.1 percent in the first seven months and the first-half pace of 7.2 percent.

State-owned industrial companies' profits grew 8 percent, while the profits of private-sector companies increased 16.2 percent.

Profits mainly came from three areas: the portion of the utility industry that covers electricity, heating production and supply; vehicle manufacturing and iron and steel smelting. The three sectors recorded combined profits of 35.2 billion yuan, pushing up overall profit growth by 8.2 percentage points year-on-year.

The surge in profitability reflects stronger manufacturing and sales conditions, as well as lower operating costs, said He Ping, a senior NBS economist.

"Industrial output in August rose 10.4 percent year-on-year, hitting a monthly high for 2013. Meanwhile, the corresponding cost for every 100 yuan worth of core business was 86.28 yuan, down by 0.79 yuan compared with July," He said.

The manufacturing sector, which accounts for one-third of the country's economic output, has grappled with weaker growth since last year as demand shrank.

But since August, China has seen a broad-based recovery in major economic indicators, boding well for the economy's prospects for the remainder of the year and prompting several foreign banks to raise their forecasts for 2013 GDP growth.

These latest figures are in line with earlier predictions that the government may still accelerate investment projects and cut interest rates, among other efforts, to defend a 7.5-percent GDP growth target, according to Michael McDonough, global head of economics at Bloomberg LP.

"Our current GDP growth forecast of 7.5 percent for both Q3 and 2013 may have more upside, particularly if the export recovery holds up," wrote Wang Tao, chief China economist at UBS AG, in a September note.

Shares of industrial companies bounced back on Friday, lifted by the promising data. Aluminum Corp of China was up by the 10-percent limit in Shanghai. Yanzhou Coal Mining Co jumped 4.08 percent, while giant China Shenhua Energy Co Ltd edged up 0.42 percent.