In­dus­trial earn­ings show up­grad­ing pays div­i­dends

China Daily (Hong Kong) - - BUSINESS - By WANG YANFEI wangyan­fei@chi­

Prof­its earned by ma­jor in­dus­trial firms wit­nessed steady growth in June, the lat­est sign of con­tin­ued re­cov­ery in the world’s sec­ond-largest econ­omy.

Prof­its made by ma­jor in­dus­trial com­pa­nies rose 19.1 per­cent year-on-year in June, up from the 16.7-per­cent growth in the pre­vi­ous month, data from the Na­tional Bureau of Sta­tis­tics showed on Thurs­day.

Struc­tural im­prove­ments in the in­dus­trial sec­tor paid off, with prof­its earned by high­tech man­u­fac­tur­ing in­creas­ing in June, while prof­its in tra­di­tional sec­tors such as min­ing de­clined dur­ing the same pe­riod.

The pos­i­tive profit data came af­ter a se­ries of sta­tis­tics re­leased ear­lier this month, re­flect­ing the con­tin­ued ex­pan­sion of the in­dus­trial sec­tor.

Data such as the Pro­ducer’s Man­ager In­dex and in­dus­trial value-added out­put achieved bet­ter-than-ex­pected growth in June.

“The low base ef­fect con­trib­uted to high speed month-on­month growth in June, but in gen­eral, based upon re­cent data re­leased, the prof­its of in­dus­trial firms have been on the track to see medium-to- per­cent high growth,” said Gao Ming, an an­a­lyst with China Mer­chants Se­cu­ri­ties.

Some pos­si­ble neg­a­tive fac­tors such as slower in­vest­ment in June have not dragged down the growth pace, ac­cord­ing to Gao.

A slower-than-ex­pected de­cline in hous­ing sales means the ap­petite for in­dus­trial prod­ucts has re­mained healthy, he added.

The im­proved out­look for eco­nomic growth will sup­port the ro­bust growth of prof­its, af­ter the econ­omy wit­nessed solid growth in the first six months, ac­cord­ing to Gao.

In the mean­time, a pos­si­ble cool­ing of the prop­erty mar­ket may put some down­ward pres­sure on profit growth, ac­cord­ing to Zhao Yang, chief China econ­o­mist with No­mura Se­cu­ri­ties.

In­creased costs of com­pa­nies in re­cent months are an­other source of pres­sure on fu­ture profit gains, ac­cord­ing to He Ping, a statis­ti­cian at the NBS.

The cen­tral govern­ment has im­ple­mented a se­ries of mea­sures start­ing from the be­gin­ning of this year in order to pre­vent as­set bub­bles and re­duce debt lev­els.

Ef­forts to curb fi­nan­cial risks have led to con­cerns that com­pa­nies would face higher costs.

Li Bin, deputy head of the mon­e­tary pol­icy depart­ment of the Peo­ple’s Bank of China, said firms are un­likely to be af­fected much by reg­u­la­tory mea­sures, be­cause to­tal so­cial fi­nanc­ing, a broad mea­sure of liq­uid­ity in the mar­ket, con­tin­ued to in­crease at rea­son­able pace on a monthly ba­sis.

“While fend­ing off fi­nan­cial risks, the govern­ment will en­sure that the fi­nanc­ing de­mand of com­pa­nies can be prop­erly met,” said Li.

growth of prof­its made by ma­jor in­dus­trial com­pa­nies year-on-year in June

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