China November industry
profits grow well, but chance to sustain gains clouded
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[December 27, 2016]
BEIJING
(Reuters) - China's industrial sector showed the strongest profit growth
in three months in November, suggesting the world's second-largest
economy was improving, though policymakers noted gains were too
dependent on rebounding prices for oil products, iron and steel.
Industrial profits have had a solid rebound this year after falling last
year, boosted by a recovery in commodity prices as supply tightened due
to a capacity reduction drive and an infrastructure boom.
Profits in November rose 14.5 percent to 774.6 billion yuan ($111
billion) from a year ago, the highest since August's record 19.5 percent
spike, National Bureau of Statistics (NBS) said on Tuesday. Profits in
October rose 9.8 percent.
Industrial profits rose 9.4 percent in the first 11 months from a year
earlier, up from 8.6 percent in January-October.
"Industrial profits rose relatively fast due to a lower base last year,
and the growth was overly reliant on a price rebound in raw material
industries such as oil refining, and iron and steel," He Ping, an NBS
official, said in a note accompanying the data.
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Profits in manufacturing rose 13.7 percent for January-November from a
year earlier, while those for the ferrous metal processing industry as
well as oil and nuclear fuel refining more than tripled.
BROADER CRACKDOWN?
Producer prices rose at the fastest pace in more than five years in
November as prices of coal, steel and other building materials soared,
boosting industrial profits and giving firms more cash to pay off
mountains of debt.
But analysts say recent signals from China's top leaders that more will
be done in 2017 to crack down on asset bubbles is putting pressures on
raw material prices, casting doubts over the sustainability of such a
price rebound.
"The question is whether price rises in recent months resulted from a
genuine improvement in demand, or financial speculation," said Zhou Hao,
senior economist at Commerzbank.
"From what we are seeing, the leadership apparently thinks it's the
latter."
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![](../images/122716pics/busine17.jpg)
A worker welds in the Tianye Tolian Heavy Industry Co. factory in
Qinhuangdao in the QHD economic development zone, Hebei province,
China December 2, 2016. REUTERS/Thomas Peter
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Zhou
said the government "might introduce new policy measures to curb raw material
price growth."
Chinese steel futures fell sharply on Monday to the lowest level in over a
month, as traders took cues from market talk that Beijing may tolerate slower
economic growth amid rising debt and an uncertain global environment.
STABLE GROWTH
Tuesday's data covers large enterprises with annual revenue of more than 20
million yuan from their main operations.
China's growth has stabilized this year, with 6.7 percent expansion in gross
domestic product in the first three quarters. But corporate debt continues to
rise, increasing risks as China looks to push ahead structural reforms.
Firms are seeing more payments being delayed, as accounts receivable at the end
of November rose 9 percent from a year earlier. That increase was biggest than
the rise in revenue from main operations.
"The difficulty in making repayments is still a relatively large hurdle that
limits the production and operation of firms," NBS's He noted.
Tuesday's data also showed Chinese industrial firms' liabilities at the end of
November were 5.6 percent higher than at the same point last year, despite
rising at a slower pace than assets have.
China's industrial output should grow around 6 percent in 2017, like this year,
a state-run newspaper quoted industry minister Miao Wei as saying on Monday.
(Reporting by Beijing Monitoring Desk and Yawen Chen; Editing by Simon
Cameron-Moore and Richard Borsuk)
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