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Industrial firms see profit growth slow

Xin Zhiming
Updated: Oct 28,2016 7:47 AM     China Daily

Profit growth of China’s major industrial firms slowed in September, but analysts said the country’s corporate profitability may continue to improve.

Profits of China’s major industrial firms, or those whose annual revenue from their main operations reaches or exceeds 20 million yuan ($2.9 million), rose 7.7 percent year-on-year to 577 billion yuan in September, compared with 19.5 percent in August, the National Bureau of Statistics said on Oct 27.

Total profits of those firms for the first nine months reached 4.64 trillion yuan, up 8.4 percent from the same period a year ago.

Profits in industries such as electronics, steel and electricity registered a significant drop in growth, He Ping, an NBS statistician, said in an article published on the bureau’s official website. He also said the effect of a low base contributed to September’s fall in profit growth, as profits rose at the slowest pace since August last year.

Analysts said corporate profits may continue to improve as the world’s second-largest economy is showing initial signs of stabilizing.

“The situation may continue to improve as the country’s efforts to cut excessive production capacity and lower production costs are showing results, while the stabilizing economy, rising prices and lower costs will help industrial firms to increase profits,” said Liang Jing, an economist at the Institute of International Finance, a think tank affiliated with the Bank of China.

Month-on-month, profits of China’s major industrial firms rose by 12.3 percent in the third quarter, far higher than the first and second quarters, when growth was 7 percent and 4.3 percent respectively, according to a China Merchants Securities report. “The trend of industrial firms’ improving profitability has not changed,” it said.

China’s GDP growth was 6.7 percent year-on-year in the third quarter, signaling that the economy is stabilizing amid widespread concerns that the main engine for global growth might lose steam.