Chinese industrial companies’ profits rose for a third month in November, supporting a rebound in economic growth that may ease the transition to the nation’s new leadership.
The world’s second-biggest economy is set for the first pickup in growth in eight quarters after the government accelerated investment-project approvals and boosted spending on infrastructure. The new Communist Party leadership led by Xi Jinping is seeking to sustain the recovery without fueling property-price bubbles or adding to bad-loan risks in the banking system.
“China’s economic recovery trend is quite clear now, and growth in the first half of 2013 will be strong as local governments are eager to start new investment projects now,’ Shi Lei, a Beijing-based analyst with Founder Securities Co., said before the release. ‘‘At the same time, recovery prospects are clouded by weak external demand and a possible crackdown from regulators on the shadow banking system.”
The Shanghai Composite Index (SHCOMP) of stocks advanced yesterday to the highest level in five months after investors wiped out losses of as much as 11 percent during this year. The gauge was 0.1 percent lower as of 11:30 a.m local time today on concern a rally that lifted shares from an almost four-year low is excessive.
A separate report pointed to limits on China’s recovery.
The nation’s rebound is uneven, with improvements in retailing, real estate and mining countered by rising inventories and lower corporate borrowing, according to a report modeled on the U.S. Federal Reserve’s Beige Book and released last night.
While shopping outlets and services companies are optimistic, credit conditions signal “this is not yet a period of strong expansion,” CBB International LLC, a New York-based researcher, said in an e-mailed summary of its China Beige Book.
“The economy as a whole saw an uneven rebound in the fourth quarter, driven by strength in retail, real estate, mining and to a lesser extent, manufacturing,” said Leland Miller, New York-based president of China Beige Book International. “But serious structural issues remain, including expanding manufacturing and mining inventories and credit-easing policies that continue to yield increasingly diminished returns.”
Economic growth probably accelerated to 7.8 percent in the fourth quarter from a year earlier according to the median estimate in a Bloomberg News survey of 34 economists this month. That compares with 7.4 percent in the previous three months, the slowest pace in three years.
The World Bank says growth may be as much as 8.4 percent next year after a likely 7.9 percent expansion in 2012, set to be the weakest pace since 1999.
Industrial companies’ profits in the first 11 months of the year rose 3 percent to 4.66 trillion yuan, compared with a 24.4 percent gain in the same period in 2011 and a 0.5 percent increase in the first 10 months.
Profit growth will continue to recover in the first half of next year as revenue improves, UBS AG’s chief China economist Wang Tao said in a Dec. 20 report.
In the first 11 months, industrial companies’ sales increased 10.8 percent from a year earlier to 82.3 trillion yuan. That compares with a 21.6 percent gain in the same period last year.
Among 41 industry categories covered by the statistics bureau data, 30 reported profits rose in the January-November period from a year earlier, including 62.9 percent growth in the power generating industry, as coal prices fell, and 16.6 percent in the food processing sector. Auto industry earnings rose 7.4 percent in the first 11 months, slowing from a 9 percent pace in the first 10 months.
Ten industries reported a drop in profits, including non- ferrous metals smelting and chemicals manufacturing, while losses in the oil and nuclear processing industries widened, the bureau said.
--Zhou Xin, Zheng Lifei. With assistance from Regina Tan in Beijing. Editors: Nerys Avery, Paul Panckhurst
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