Profits soar most in three years for Chinese industrial companies

Profits of China’s industrial corporations jumped the most in three years, adding to evidence of continued stabilisation in manufacturing and boosting prospects for their ability to repay debt.

Industrial profits rose 19.5 per cent in August from a year earlier to 534.8 billion yuan (Dh294.55bn), the national bureau of statistics (NBS) said on Tuesday. That completes August data that showed new credit, industrial output, fixed-asset investment and retail sales picked up and beat analysts’ estimates. Meantime, private indicators show upbeat sentiment in business confidence and increased factory activity continued in September.

“The pick-up in industrial profit is driven by commodities prices and the property market boom, in line with recovering factory-gate prices, which will turn positive this year,” said Raymond Yeung, the chief greater China economist at Australia & New Zealand Banking in Hong Kong. Improving profits signal companies are more able to repay debt, he said.

Economists have raised their forecasts for 2016 GDP growth on increasing evidence the government’s fiscal support has helped to successfully underpin the economy. They have also ratcheted back expectations for additional monetary stimulus as policymakers switch gears to reigning in surging home prices in some of China’s biggest cities.

Strong sales growth, rebounding prices and decreasing costs contributed to the profit surge, said the NBS. Car, steel and oil processing companies performed best, it said.

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