China industrial profits held up in October amid price gains

The coal, steel, chemical and oil industries contributed 51.2 percent to the overall industrial profit growth in the first 10 months, the statistics bureau said in a statement.
The coal, steel, chemical and oil industries contributed 51.2 percent to the overall industrial profit growth in the first 10 months, the statistics bureau said in a statement. PHOTO: AFP

BEIJING (BLOOMBERG) - Chinese industrial profits maintained their recent surge, underscoring resilience in the economy and strength in producer inflation.

Industrial profits increased 25.1 per cent in October from a year earlier, compared with a 27.7 per cent pace a month earlier that was the highest in almost six years, the National Bureau of Statistics said on Monday (Nov 27). Profits in the first 10 months of the year climbed 23.3 per cent to 6.25 trillion yuan (S$1.27 billion).

"Industrial profits in China remain strong, supported by the significant easing in Chinese monetary conditions in 2016," said Callum Henderson, a managing director for Asia-Pacific at Eurasia Group in Singapore. "Going forward, however, with monetary conditions tightening somewhat this year given a stronger currency and higher market interest rates, we expect both real gross domestic product growth and corporate profits to slow."

Robust factory inflation has kept mills and plants profitable most of this year, and the authorities' moves to clean up pollution has benefited stronger firms as smaller competitors shut down. That boom will be tested by a cooling property market and intensified actions to reduce leverage as the country's leadership de-emphasises nominal growth targets.

The coal, steel, chemical and oil industries contributed 51.2 per cent to the overall industrial profit growth in the first 10 months, the statistics bureau said in a statement. Costs are decreasing and capital is being used more efficiently, the NBS said.

"Major sectors driving growth remain in the upstream commodity sectors," said Betty Wang, senior economist at Australia & New Zealand Banking Group Ltd in Hong Kong. "The rising trend is also consistent with the strong producer price index momentum of late and likely will continue for the rest of this year."