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China’s industrial profits grow for the fourth consecutive month

SHANGHAI (Reuters) – Chinese industrial companies’ profits rose for a fourth straight month in August, supported in part by a rebound in commodity and equipment manufacturing prices, the statistics office said Sunday.

FILE PHOTO: A worker welds a bicycle steel rim at a sports equipment factory in Hangzhou, Zhejiang Province, China, September 2, 2019. China Daily via REUTERS

China’s recovery has gained momentum as pent-up demand, government stimulus and surprisingly resilient exports push for a recovery.

Profits of industrial companies grew 1

9.1% yoy in August to 612.81 billion yuan ($ 89.8 billion), the statistical office said.

This compares with a 19.6% increase in July and is the fourth consecutive month of profit growth.

However, the profits of industrial firms still face external pressures as rising tensions between Washington and Beijing cloud the prospects for global trade.

Profits from commodity manufacturing increased 32.5% in August, from 14.7% in July, according to Zhu Hong, a statistical office official. This was partly driven by a rebound in the prices of international commodities such as crude oil and iron ore, he added.

Meanwhile, the profits of the general equipment manufacturing sector increased 37% in August over the year, with electric cars up 13.3% over the same period.

Economic indicators for August, ranging from exports to producer prices and factory production, all pointed to a further recovery in the industrial sector.

However, factory activity grew at a slower pace with small businesses struggling with weak market demand and financial strains.

The country has introduced a number of measures to revive the economy, from tax and fee cuts to debt claims grace periods.

China’s economy could stagnate if it fails to move up the value chain as it faces increasing competition from countries with advanced technologies and lower labor costs, economists have warned.

The authorities have pledged to promote investment in strategic industries, including key technology sectors such as 5G, artificial intelligence and semiconductors, and to accelerate the development of new materials to ensure stable supply chains.

For January-August, industrial enterprise profits fell 4.4% from the previous year to 3.72 trillion yuan, better than the 8.1% decline in the first seven months.

Liabilities with industrial companies increased by 6.6% on an annual basis at the end of August, exceeding the 6.5% at the end of July.

Earnings of state-owned industrial firms declined 17% year-on-year for the first eight months of the year, compared with a 23.5% decline in the first seven months.

Private sector profits fell 3.3% in January-August, narrowing from the 5.3% decline in January-July.

Reportage by Luoyan Liu and Engen Tham in Shanghai; Editing by William Mallard and Stephen Coates

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