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China’s industrial profits rise for the fourth straight month

SHANGHAI (Reuters) – Chinese industrial companies’ profits rose for the fourth straight year in August, in part due to a rebound in commodity prices and equipment manufacturing, the statistics bureau said on Sunday.

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

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

Industrial company profits rose 1

9.1% year over year to 612.81 billion yuan ($ 89.8 billion) in August, the statistics bureau said.

That was a 19.6% increase in July and is the fourth straight month of earnings growth.

However, industrial company profits are still under external pressure as tensions between Washington and Beijing cloud the global trade outlook.

According to Zhu Hong, an official with the statistics bureau, raw material manufacturing profits rose 32.5% in August, compared with 14.7% in July. This was partly due to a rebound in prices for international commodities like crude oil and iron ore, he added.

General equipment sector profits rose 37% year over year in August, while electrical machine numbers rose 13.3% over the same period.

Economic indicators in August, which ranged from exports to producer prices and factory output, pointed to a further recovery in the industrial sector.

Factory activity grew more slowly, however, as smaller companies faced sluggish market demand and financial stress.

The country has put in place a number of measures to stimulate the economy, from tax and fee cuts to grace periods for debt collection.

China’s economy could stagnate if it does not increase the value chain as it faces increasing competition from countries with advanced technologies and lower labor costs, economists warned.

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

From January to August, industrial company profits fell 4.4% year over year to 3.72 trillion yuan, better than the 8.1% decline in the first seven months.

The liabilities of industrial companies rose by 6.6% year-on-year at the end of August and were thus above the 6.5% at the end of July.

State-owned industrial enterprises’ revenues fell 17% annually for the first eight months of the year, while they fell by 23.5% in the first seven months.

Private sector earnings declined 3.3% from January to August and declined 5.3% from January to July.

Reporting by Luoyan Liu and Engen Tham in Shanghai; Adaptation by William Mallard and Stephen Coates

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