Bloomberg News

China’s Industrial Profits Jump 29% in First Half on Year

July 27, 2011

(Updates with economist’s comment in fourth paragraph.)

July 27 (Bloomberg) -- Chinese industrial companies’ profits grew at a faster pace even after the government raised interest rates and tightened credit to counter inflation.

Net income climbed 28.7 percent in the first six months to 2.41 trillion yuan ($374 billion) from a year earlier, the National Bureau of Statistics said on its website today. That compares with a 27.9 percent gain in January through May.

Climbing profits for companies such as Anhui Conch Cement Co., the nation’s biggest cement producer, fuel investment that is underpinning the economy’s expansion. The International Monetary Fund forecasts that China’s gross domestic product will rise 9.6 percent this year, also bolstered by a government plan to build millions of low-cost homes.

“This is surprising and adds to signs that any slowdown in the economy will be only moderate,” said Lu Zhengwei, an economist at Industrial Bank Co. in Shanghai. “The government’s social housing program may be part of the explanation.”

The Shanghai Composite Index swung between gains and losses, with U.S. lawmakers yet to reach an agreement to prevent that nation from defaulting on its debt. The gauge rose 0.1 percent as of the 11:30 a.m. local time break in trading.

Industrial companies’ revenue rose 29.7 percent to 38.86 trillion yuan, the statement showed. Profit from ferrous-metal mining and exploration jumped 61.7 percent.

Roubini’s View

Anhui Conch Cement said July 14 that six-month profit likely jumped 200 percent on higher prices. In contrast, power producer Shenzhen Energy Group Co. reported that net income declined on rising fuel costs.

Gross domestic product gained 9.5 percent in the second quarter, the least in almost two years. The Shanghai stock index has fallen about 12 percent from this year’s high in April on concern that measures to tame inflation and cool the property market will trigger a slowdown.

Nouriel Roubini, the co-founder and chairman of New York- based Roubini Global Economics LLC, said yesterday in Shanghai that a hard landing for China is a “very low probability” in the short term. He has more concerns about the outlook after 2013.

The bureau’s data covers companies with annual sales of at least 20 million yuan in 39 industries, including oil and gas exploration, chemicals, transportation equipment manufacturing, telecommunications, and power generation.

China has raised rates five times since mid-October and pushed bank reserve requirements to a record, leading small and medium-sized businesses to report a funding squeeze.

Signs of an economic slowdown include a possible contraction in manufacturing this month, indicated by the preliminary reading for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics.

--Victoria Ruan. Editor: Paul Panckhurst, Ken McCallum.

To contact Bloomberg News staff on this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net


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