China Industrial Profits Increase to Bolster Rebound: Economy

Chinese industrial companies’ profits rose 17.2 percent in the January-February period, extending a four-month streak of gains and bolstering a rebound in the world’s second-biggest economy.

Net income increased from a year earlier to 709.2 billion yuan ($114 billion), the National Bureau of Statistics said on its website today. That compares with a 5.2 percent decline in the same period last year and a 17.3 percent gain in December. The bureau doesn’t release separate data for January and February because of distortions caused by the weeklong Lunar New Year holiday.

Higher profits will help boost investment and aid new Premier Li Keqiang in sustaining a recovery after industrial production and retail sales had the weakest start to a year since 2009. Manufacturing is expanding at a faster-than-forecast pace this month, a private survey showed last week.

“This is a stronger-than-expected figure and it indicates the economic rebound since the fourth quarter still remains on track,” said Ren Xianfang, a Beijing-based analyst with researcher IHS Inc. “The robust profit growth could boost corporate investment, which in turn should help sustain the recovery.”

China’s economy expanded 7.9 percent in the final three months of last year, the first acceleration in two years after a 7.4 percent gain in the previous quarter. Growth may pick up to 8.1 percent this quarter, according to the median analyst estimate in a Bloomberg News survey this month.

Sales Increase

Industrial companies’ sales rose 13.1 percent to 13.7 trillion yuan, today’s report showed. The statistics bureau combines the first two months’ figures to smooth out distortions from the New Year holiday, which fell in February this year and January of 2012.

Among 41 industry categories covered in the report, 30 saw profits increase, eight reported declines, two returned to profit after losses and one had narrower losses, according to the statistics bureau.

The benchmark Shanghai Composite Index of stocks fell 2.8 percent to a three-month low on concern new wealth-management product rules will hurt earnings. The CSI 300 Financials Index slumped 5.3 percent, the most since March 4 and the biggest drop among the CSI 300’s 10 industry groups.

“After a difficult year last year, many companies have managed to clean up their cost structure and the fruits are showing up in the first two months of this year,” said Steve Wang, head of China research at Reorient Group Ltd. in Hong Kong. Some “business-friendly policies” from former Premier Wen Jiabao, such as tax changes, are helping profits now, Wang said.

Profit Forecast

Industrial profits may gain by an average 30 percent this year as the economy rebounds, businesses start restocking and export demand improves, Standard Chartered Plc said in January.

That kind of increase is “probably too optimistic,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong.

“Manufacturing investment is still probably the biggest uncertainty for the recovery story at this moment,” Zhu said in a Bloomberg Television interview yesterday in Beijing. “Corporate profits usually are a good leading indicator to suggest the timing of the turning-around or bottoming-out.”

Elsewhere in the Asia-Pacific region today, Taiwan’s central bank kept its benchmark interest rate at 1.875 percent as forecast by all 20 economists surveyed by Bloomberg News. Japan’s retail sales fell for a second month in February, while Australia reported a decline in job vacancies for the December-February period.

German Unemployment

Data in Europe showed German retail sales unexpectedly rose last month from January while the jobless rate for March was unchanged at 6.9 percent.

In the U.S., revised figures from the Commerce Department may show the economy expanded at a 0.5 percent annual pace in the fourth quarter, faster than the government’s previous estimate of 0.1 percent growth, according to the median forecast in a Bloomberg survey.

China’s factory output expanded 9.9 percent in the first two months of 2013 from a year earlier, the least for a January-February period since 2009, statistics bureau data showed on March 9. Retail sales increased 12.3 percent in the first two months, the weakest gain for the period since 2004.

At the same time, foreign direct investment in China rose for the first time in nine months in February, Commerce Ministry data showed on March 19. A preliminary manufacturing index for this month released on March 21 by HSBC Holdings Plc and Markit Economics rose more than forecast.

Datang International Power Generation Co., one of China’s biggest electricity producers, said March 25 that 2012 profit more than doubled to about 4 billion yuan, exceeding forecasts.

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