Industries see profits jump by 24 percent

The profits of China's industrial enterprises registered the fastest growth in four years in August, thanks to rising product prices and falling costs, the National Bureau of Statistics said on Sept 27.

Analysts say the country's industrial profits may continue to grow at a stable pace as demand rises.

Profits jumped by 24 percent year-on-year in August to 672 billion yuan ($101 billion; 86 billion euros; ￡75 billion), compared with 16.5 percent in July, the NBS said.

It is the biggest single monthly percentage growth since August 2013, without considering the combined profit growth in January and February of 31.5 percent. The NBS does not release single month growth rates for those two months because economic activities are disrupted by the long Spring Festival holiday, which starts either in January or February.

Rising prices for industrial products, especially in sectors such as oil, steel and electronics, and falling corporate costs contributed to the high growth rates of industrial profits in August, He Ping, a senior official of the NBS, said in a statement on the bureau's website.

China's reduction of excessive production capacity and the environmental protection measures put in place since last year have led to reduced production and rising prices for some industrial products. Meanwhile, costs have dropped, accounting for 92.74 percent of the main business revenues of industrial enterprises on average in August, compared with 93.4 percent a year ago, according to the NBS.

"The (August) figures are really positive - they show China's effort to cut down on overcapacity is working well," says Iris Pang, Greater China economist at ING bank in Hong Kong, according to Reuters.

As China's controls on real estate prices continue, some analysts are concerned that demand for many industrial products may soften, which would affect the sustainability of industrial profit growth.

Gao Ming, an analyst with China Merchants Bank, says such concerns are not well founded. "Demand has become less dependent on investment and real estate and instead more reliant on consumption and exports," he said. As exports and consumption continue to improve, industrial enterprises will benefit and maintain a stable growth that fluctuates around 15 to 20 percent in the middle term, Gao says.

China's rising income levels will help expand demand for products in sectors such as housing, transportation, health and entertainment, says Ren Zeping, chief economist of Founder Securities. Meanwhile, economies of more countries and regions, such as Europe, are recovering, which will benefit China's exports, he says.

Pang of ING bank says: "We are bullish on China's growth. It's not just capacity cuts that are boosting prices. Demand is quite strong, too."

For the first eight months of this year combined, industrial enterprises saw profits rise to 4.92 trillion yuan, up by 21.6 percent year-on-year, compared with 21.2 percent in the January-to-July period, the NBS said.

Contact the writers through xinzhiming@chinadaily.com.cn

(China Daily Africa Weekly 09/29/2017 page14)