Bloomberg News

China Industrial Companies’ Profits Climb a Fourth Month

January 27, 2013

Chinese industrial companies’ profits rose for a fourth month in December, adding to signs the country’s economic rebound is gaining momentum.

Net income increased 17.3 percent from a year earlier to 895 billion yuan ($144 billion), the National Bureau of Statistics said today in Beijing, after a 22.8 percent jump in November. Earnings for the full year gained 5.3 percent.

Industrial profits may rise by an average 30 percent this year as the world’s second-biggest economy recovers from a seven-quarter slowdown, businesses start restocking and export demand improves, Standard Chartered Plc forecasts. Expansion in gross domestic product may accelerate to 8.1 percent this year from 7.8 percent in 2012, according to the median of 44 analyst estimates in a Bloomberg News survey this month.

“This broadly confirms the picture we’re getting from other data that industrial and economic growth is picking up again and the pressure on output prices is diminishing,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong. “Because of quite weak numbers in the first half of 2012, the profit numbers are likely to show strong year-on- year growth in the coming months.”

China’s economic expansion will be above 8 percent this year, Lou Jiwei, chairman of the nation’s sovereign wealth fund, said at a forum in Beijing yesterday. Gross domestic product increased 7.8 percent last year, the least since 1999, according to government data.

Bolster Prospects

The Chinese Academy of Sciences forecast economic growth this year will accelerate to 8.4 percent, according to its annual outlook published yesterday.

The preliminary reading of a Purchasing Managers’ Index last week showed manufacturing expanding at the fastest rate in two years. If confirmed by HSBC Holdings Plc and Markit Economics in their final report on Feb. 1, the gauge would bolster prospects economic growth will accelerate from the 7.9 percent pace of the fourth quarter.

Expansion may quicken to 8.1 percent in the first quarter from a year earlier, according to the median estimate of 30 analysts in a Bloomberg survey carried out from Jan. 18 to 23.

The Shanghai Composite Index (SHCOMP), the nation’s benchmark stocks gauge, has gained 17 percent since approaching a four-year low on Dec. 3 on optimism the economic recovery will boost earnings. The index fell 1.1 percent last week amid concern the outlook doesn’t justify equity valuations that have risen to the highest levels in eight months.

Coal Prices

The increase in full-year industrial profits to 5.56 trillion yuan compared with a 25.4 percent gain in 2011 and a 3 percent advance in the first 11 months of 2012, according to previously released data. Sales for the full year rose 11 percent to 91.6 trillion yuan, today’s statement showed.

Among 41 industry categories covered in the report, 29 saw profits increase, 11 reported declines and oil refining and nuclear-fuel processing recorded losses. Earnings of power- generating and supply companies surged 69.1 percent last year as coal prices fell while the vehicle industry’s profit rose 5.6 percent, according to today’s data.

Earnings in power generation and food processing industries should continue to expand this year while the telecommunications sector is returning to the path of profit growth, Standard Chartered economists Stephen Green, based in Hong Kong, and Shen Lan, based in Shanghai, wrote in a Jan. 17 note.

ZTE Corp. (763), China’s second-biggest mobile-phone equipment maker, said Jan. 20 it may swing to a profit in the first quarter after estimating a net loss of as high as 2.9 billion yuan in 2012.

--Zheng Lifei. With assistance from Fan Wenxin in Shanghai. Editors: Nerys Avery, Russell Ward

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net

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


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