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China Daily Website

Theories given for industry's profit decline in Sept

Updated: 2013-10-29 07:26
By Chen Jia ( China Daily)

Chinese industrial companies recorded profit growth of 18.4 percent year-on-year in September, slowing from 24.2 percent in August, the National Bureau of Statistics said.

Despite the moderation, industrial producers still have positive expectations for the coming months, which may support further solid profit growth, analysts said.

During the first nine months, industrial profits increased 13.5 percent, accelerating from 12.8 percent in the January-August period, the NBS said in a report on Sunday.

Sales were up 11 percent as of September, compared with 10.9 percent as of August.

He Ping, an NBS economist, said that the relatively fast expansion of industrial profits in September reflected a combination of sales growth, higher ex-factory prices and lower costs.

However, he said, a slowdown in investment income resulted in more moderate profit growth in September.

Zhu Haibin, chief economist in China at JPMorgan Chase & Co, attributed the profit slowdown to the base effect: Industrial profits rose 7.8 percent in September 2012, compared with a decline of 6.2 percent in August last year.

The NBS said that last month, five industries - ferrous metal smelting, vehicle production, petroleum, coking and nuclear fuel processing - contributed 37.6 percent of the profit increase.

State-owned enterprises' profits were up 9.4 percent year-on-year in September, while the growth rate for private enterprises was 17 percent, the NBS said.

Fan Jianping, chief economist at the State Information Center, a government think tank, said that the improvement in industrial profits was another piece of evidence that the overall economy had begun to improve in the third quarter.

Based on firmer domestic demand and an accelerating overseas recovery, China's GDP was up 7.8 percent in the third quarter, compared with 7.5 percent in the second quarter.

The HSBC flash Purchasing Managers' Index for October indicated that activity is likely to rise to a seven-month high of 50.9, compared with 50.2 in September, because of increased output and new orders.

Wang Tao, chief economist in China at UBS, said that in the coming months, the industrial sector may maintain steady profit growth, because the government has shown no signs of further crimping property construction.

"That will support growth and help digest some of the excess capacity in some heavy industries," Wang said.

Wang added that a comprehensive reform package would likely be announced at the upcoming Third Plenary Session of the 18th Central Committee of the Communist Party of China.

Analysts said more reforms related to urbanization, industrial restructuring and encouraging private investment will reinforce the industrial sector's development.

 
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