China industrial firms' Jan-Feb profits return to growth

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[March 28, 2016]  BEIJING (Reuters) - China's industrial profits returned to growth in the first two months of 2016, partly due to a recovery in the property market despite an otherwise struggling economy.

Profits earned by Chinese industrial firms in January and February combined rose 4.8 percent from a year earlier, totaling 780.7 billion yuan ($119.8 billion) in the two-month period, the National Bureau of Statistics (NBS) said on Sunday.

That compared with an annual fall of 4.7 percent in December 2015, which was the seventh straight month of decline.

"The recovery in property investment has helped industrial profits return to positive growth," Zhang Wenlang, an analyst at CITIC Securities, wrote in a note on Monday.

"Looking forward, industrial profits are likely to grow this year thanks to improved household consumption, a recovery in property investment and a halt in the slump in commodity prices."
 


China's real estate investment rose 3 percent in the first two months of 2016 in year-on-year terms, quickening from an increase of 1 percent in the full year of 2015.

The positive trend was also driven by quicker product sales of industrial firms and a slower decline in industrial producer prices, NBS official He Ping said in a statement accompanying the data.

The oil processing, electrical machinery and food sectors contributed significantly to the growth in profits, He added, saying the sectors benefited from lower oil prices.

Growth in the food industry was driven by strong demand as well as a decline in prices for some raw materials, the statement added.

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The NBS combines profits for the first two months of each year to smooth out seasonal distortions caused by the Lunar New Year holiday, when most companies are closed for the long celebrations.

China's producer prices fell for the 48th month in a row in February though their pace of decline eased, highlighting the persistent pressure on manufacturers.

China's Premier Li Keqiang said on Thursday that the country has enough policy tools to keep the economy stable despite "deep rooted" structural problems and downward pressure.

Chinese leaders have set an economic growth target of 6.5 percent to 7 percent for this year, introducing a range rather than a more precise target as it seeks greater flexibility in juggling growth, job creation and restructuring of a host of "zombie companies" in bloated industries.

(Reporting by Coco Li Megha Rajagopalan and Xiaoyi Shao; Editing by Jacqueline Wong)

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