Manufacturing News

Industrial profits increase for 4th month in a row

Chinese industrial companies' profits rose for a fourth month in December, adding to signs the country's economic rebound is gaining momentum.

Net income increased 17.3 percent from a year earlier to 895 billion yuan ($144 billion), the National Bureau of Statistics said on Sunday in Beijing, after a 22.8 percent jump in November. Earnings for the full year gained 5.3 percent.

Industrial profits may rise by an average 30 percent this year as the world's second-biggest economy recovers from a seven-quarter slowdown, businesses start restocking and export demand improves, Standard Chartered Plc forecast. Expansion in gross domestic product may accelerate to 8.1 percent this year from 7.8 percent in 2012, according to the median of 44 analyst estimates in a Bloomberg News survey this month.

"Profit growth will pick up this year on the back of the economic rebound," said Tim Condon, chief Asia economist at ING Financial Markets in Singapore, who previously worked for the World Bank, before the release. "Stronger profit growth will mitigate the slowdown in investment expansion."

China's economic growth will be above 8 percent this year, Lou Jiwei, chairman of the nation's sovereign wealth fund, said at a forum in Beijing. Gross domestic product expanded 7.8 percent last year, the least since 1999, according to government data.

The preliminary reading of a Purchasing Managers' Index last week showed manufacturing expanding at the fastest rate in two years. If confirmed by HSBC Holdings Plc and Markit Economics in their final report on Feb 1, the gauge would bolster prospects for economic growth accelerating from the 7.9 percent pace of the fourth quarter.

Expansion may quicken to 8.1 percent in the first quarter from a year earlier, according to the median estimate of 30 analysts in a Bloomberg survey carried out from Jan 18 to 23.

The Shanghai Composite Index, the nation's benchmark stocks gauge, has gained 17 percent since approaching a four-year low on Dec 3 on optimism the economic recovery will boost earnings. The index fell 1.1 percent last week amid concern the outlook doesn't justify equity valuations that have risen to the highest levels in eight months.

The full-year industrial profits were 5.56 trillion yuan in 2012, a year-on-year increase of 5.3 percent compared with a 25.4 percent gain in 2011, according to the National Bureau of Statistics.

Earnings in power generation and food processing industries should continue to expand this year while the telecommunications sector is returning to the path of profit growth, Standard Chartered economists Stephen Green, based in Hong Kong, and Shen Lan, based in Shanghai, wrote in a Jan 17 note.

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