Profit growth in China’s industrial sector picked up last month, aided by stronger sales and higher prices, suggesting further strengthening of the world’s second-largest economy, although growth was skewed toward high-polluting heavy industry.
There has been widespread speculation in China’s commodities futures market this year, with coal prices hitting records in recent weeks, and economists said growth driven by loose money policies would not last.
Indeed, a subdued property market is expected to drag on growth in the first half of next year, as policymakers introduce curbs to cool home prices, which could hit profits of companies producing construction materials.
Profits last month rose 9.8 percent to 616.1 billion yuan (US$89.08 billion), the Chinese National Bureau of Statistics (NBS) said in a statement yesterday.
Profits in September rose 7.7 percent.
Industrial profits increased 8.6 percent year-on-year in the first 10 months of the year, similar to an 8.4 percent annual growth rate in the first nine months.
Profits in the coal mining sector rose 112.9 percent over the first 10 months from the same period last year, while manufacturing profits rose 13.2 percent.
“Although October industrial profit growth picked up, the structure of growth was not ideal,” NBS official He Ping said in a statement accompanying the data. “Profits in traditional raw material production increased relatively quickly... while high technology and equipment manufacturing profit growth slowed.”
Profit growth was overly reliant on rising prices, and industrial firms need organic improvement to see better results, He added.
Profits for iron and steel production and processing companies rose 310.2 percent in the January-to-October period.
China’s producer prices jumped more than expected last month as prices of coal and other raw materials surged in the midst of a supply crunch and a pick-up in the economy.
The producer price index is also expected to stay positive in coming months.
Chinese industrial firms’ liabilities at the end of last month were 5.1 percent higher than at the same point last year and rose slower than assets.
The data covers large enterprises with annual revenues of more than 20 million yuan from their main operations.
Profits at state firms rose an annual 0.4 percent in the first 10 months of the year, marking the first increase in year-to-date earnings for state-owned companies this year, the Chinese Ministry of Finance said on Friday.
Industrial profits have rebounded strongly this year after falling last year, boosted by a recovery in commodities prices as supply tightened due to a capacity reduction drive and an infrastructure boom.
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