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China Profits Jump as Yi Sees Limited Effect From Fed: Economy

China’s industrial-profit growth rebounded in July, adding to signs that the world’s second-biggest economy is stabilizing after a two-quarter slowdown and an interbank lending squeeze in June.

Net income rose 12 percent from a year earlier after gaining 6.3 percent in June, the statistics bureau said in Beijing today. Power, telecommunications, and auto manufacturing contributed to the increase, while coal miners’ profits slid.

Today’s data add to higher-than-forecast industrial production in July, a rebound in trade, and a stronger reading for a manufacturing index released last week. At a briefing in Beijing, Yi Gang, a deputy governor of the central bank, said today that a Federal Reserve exit from quantitative easing may have only a “limited” effect on China compared with other emerging economies.

“This is another indicator that helps to paint a positive picture for the near-term growth outlook,” said Chang Jian, China economist at Barclays Plc in Hong Kong. The economy may expand 7.6 percent from a year earlier this quarter, up from 7.5 percent in the second quarter, she said.

At the same time, Chang said she was cautious about the medium term as the nation grapples with industrial overcapacity, declines in export competitiveness, property oversupply and risks for the financial system. The Shanghai Composite Index fell 0.2 percent as of 11:30 a.m. local time.

G-20 Meeting

At a briefing ahead of a Group of 20 leaders meeting in St. Petersburg, Russia, next month, Chinese officials said that a key topic would be minimizing the negative effects on other nations from the Fed winding back stimulus. Vice Finance Minister Zhu Guangyao cited India and Indonesia as examples. At the same time, Yi said that the impact on China is “not that obvious.”

Zhu said China is shifting gears in terms of growth rate, while going through “painful” economic restructuring and digesting the effects of past domestic stimulus measures.

In Tokyo, meanwhile, expert panels are meeting this week to discuss the threat that a planned sales-tax increase to 8 percent from 5 percent in April next year poses to the nation’s recovery because of the likely blow to consumption.

Former Bank of Japan Deputy Governor Kazumasa Iwata yesterday joined advisers to Prime Minister Shinzo Abe in urging an alternative approach, saying that the levy should increase by 1 percentage point a year. Iwata also called for 5 trillion yen ($51 billion) in stimulus spending if the tax is hiked as planned, Economy Minister Akira Amari told reporters.

Aso, Kuroda

Seven panels meet this week, with Finance Minister Taro Aso and Bank of Japan Governor Haruhiko Kuroda among those attending. Abe will make a final decision on the tax by early October at the latest, Amari said this week.

Aso and Amari were quizzed by reporters today on the potential for a cut in corporate income tax. They said Abe hasn’t given any specific instructions to consider such a move.

Elsewhere in the world, indicators for confidence in Germany and the U.S. may give a mixed picture today. In Germany, the Ifo institute’s business climate index may rise to the highest level in six months, a Bloomberg News survey shows. The New York-based Conference Board’s index of sentiment among U.S. consumers probably fell for a second month.

China’s economy is showing increasing signs of stabilizing, statistics bureau spokesman Sheng Laiyun said yesterday at a briefing in Beijing, adding that July economic indicators gave “positive signs.”

At Nomura Holdings Inc. in Hong Kong, chief China economist Zhang Zhiwei said today that the sustainability of the nation’s recovery is not yet assured, adding that growth may drop below 7 percent in the first half of 2014. He sees a 6.9 percent expansion next year.

Premier Li Keqiang will achieve his 7.5 percent growth target this year, according to a Bloomberg News survey of economists this month.

To contact Bloomberg News staff for this story: Hu Shen in Beijing at hshen33@bloomberg.net; Penny Peng in Beijing at ppeng18@bloomberg.net

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

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