China’s Industrial Profits Rise for First Time in Six Months

Chinese industrial companies’ profits rose in September for the first time in six months, adding to signs economic growth is picking up following a seven- quarter slowdown.

Net income rose 7.8 percent from a year earlier to 464.3 billion yuan ($74.3 billion), the National Bureau of Statistics said today in Beijing. That compared with a 6.2 percent decline in August, the year’s largest drop.

Today’s report followed data showing industrial production and retail sales accelerated in September and a manufacturing gauge rose in October. Chinese Premier Wen Jiabao said the economy will keep showing “positive changes,” according to a report last week by the official Xinhua News Agency.

“As upstream commodity prices are falling, Chinese corporate profits have room to rise,” Wang Tao, chief China economist at UBS AG in Hong Kong, said before today’s report.

Huaneng Power International Inc. (600011), which develops and operates power plants across China, said Oct. 24 that its third- quarter profit rose 757 percent to 2 billion yuan.

Industrial companies’ profits in the first nine months of the year declined 1.8 percent to 3.5 trillion yuan, according to today’s statement. That compares with a 3.1 percent drop in the first eight months and a 27 percent gain in the same period in 2011. The government began reporting monthly year-over-year profit changes in October 2011.

The previous profit declines have weighed on stocks this year, with the benchmark Shanghai Composite Index down 6 percent so far in 2012. The gauge dropped 1.7 percent yesterday.

Prevent Slowdown

Revenue for industrial companies in the first nine months increased 10.2 percent from a year earlier to 65.7 trillion yuan, today’s statistics bureau report showed. Sales rose 29.6 percent in the January-September period of 2011.

Preventing any further slowdown is a chief challenge for the ruling Communist Party as it begins a once-a-decade leadership transition with a congress set to start Nov. 8 in Beijing, where Vice President Xi Jinping will probably become head of the party. At the annual session of the legislature in March, Xi is likely to succeed Hu Jintao as president and Vice Premier Li Keqiang may succeed Wen as premier.

China’s economy will probably rebound in the fourth quarter, Jia Kang, a Ministry of Finance researcher, said at a conference in Beijing today. The nation will achieve its full-year growth target of 7.5 percent and “the rebound in the fourth quarter is likely to extend into next year,” Jia said at an event at Peking University.

Capital Flight

China’s foreign-exchange regulator said yesterday that the nation is not suffering from capital flight, even as growth in foreign reserves eased “significantly” in the third quarter.

The country’s third-quarter current account surplus was $70.6 billion, bringing the nine-month surplus to $147.8 billion, the State Administration of Foreign Exchange said yesterday. Capital and financial accounts recorded a three-month deficit of $71 billion, bringing the nine-month gap to $85.4 billion, it said.

China’s gross domestic product expanded 7.4 percent from a year earlier in the July-September period, slowing from 7.6 percent in the second quarter, according to government data. Industrial production in September rose a more-than-estimated 9.2 percent from a year earlier.

China’s factory-output growth will be faster this quarter than in the previous three months, helping the nation achieve its target for economic expansion in 2012, Zhu Hongren, chief engineer at the Ministry of Industry and Information Technology, said at an Oct. 25 briefing.

The preliminary reading of a purchasing managers’ index released Oct. 24 by HSBC Holdings Plc and Markit Economics was 49.1 for October, up from a final level of 47.9 for September. Readings below 50 indicate contraction.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net; Feiwen Rong in Beijing at frong2@bloomberg.net

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

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