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Positive signs for industry emerging

By Wang Yanfei (China Daily)    08:17, September 28, 2016

Profits see fastest rise since 2013 amid restructuring, though challenges remain

China's industrial profits showed positive changes in August thanks to policy-level efforts to reduce waste and also to a low base of comparison.

But economists hastened to add that uneven growth is seen across sectors, and the country is faced with a herculean effort in structural reforms.

Data released by the National Bureau of Statistics on Tuesday show that profits of industrial enterprises increased by 8.4 percent year-on-year from January to August, up by 1.5 percentage points compared with the first seven months' year-on-year results.

Growth in industrial profits in August increased by 19.5 percent year-on-year, which is the fastest monthly growth since September 2013, data showed.

The improvement in industrial profits came from a decrease in production costs and a rebound in prices, according to the NBS. Comparison with particularly low figures for the same period last year also boosted this year's figures, NBS said.

Zhou Jingtong, a senior analyst with a think tank affiliated with the Bank of China, noted that some positive changes in the economy support the profit surge.

China's value-added industrial output growth in August increased by 0.3 percentage points compared with the previous month, and the rate of decline in the producer price index — what producers receive for their products — shrank by 0.8 percentage points compared with the previous month, data showed. PPI has been undergoing a protracted decline.

The low base for comparison was the result of a sharp fluctuation in the exchange rate and rising costs that led to the slowest growth in three years, according to Zhou.

Based on better-than-expected performance, the Asia Development Bank has upgraded China's annual growth projection this year from 6.5 to 6.6 percent.

The development bank also raised the growth estimation for next year from 6.3 to 6.4 percent from its projection in March.

However, with weak domestic and foreign demand, the foundation needed to support rapid, sustained growth in industrial profits has yet to stabilize, according to NBS.

"There's still a lot of work to be done to upgrade the real economy," said He Ping, a senior official with NBS.

Some sectors that are struggling to shed overcapacity are faced by stronger headwinds, data showed.

The subcategory of manufacturing profits rose 14.1 percent from a year earlier, but mining industry profits fell 70.9 percent, data showed.

Even though profits are expected to continue their recovery in the coming months, Zhou said enterprises' confidence in the recovery remains in the doldrums.

Agencies contributed to this story.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Yuan Can, Bianji)

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