Industrial profit growth quickens as economy firms

Major Chinese industrial firms saw their combined profits rise 11.6 percent year on year in July, quickening from the 6.3-percent rate seen in June that points to further evidence of a firming economy, official data showed on Tuesday.

The profits of industrial companies with annual revenues of more than 20 million yuan (3.24 million U.S. dollars) hit 419.55 billion yuan in July, the National Bureau of Statistics (NBS) said in a statement.

In the first seven months, their profits rose 11.1 percent to 3.0 trillion yuan.

Among the 41 industries surveyed, 27 posted year-on-year profit growth during the January-July period, while 11 saw profit decline. Two sectors reported turnarounds in profitability and one reported narrowing losses.

Breaking it down, private businesses led the growth, with their combined profits up 15.4 percent year on year in the first seven months, while state-run enterprises saw profits up 5.5 percent during the period.

While acknowledging the acceleration of profit growth, NBS analyst He Ping also cautioned that the gains were too concentrated in several sectors and the aggregate business profitability remained at a relatively low level as production costs keep climbing.

Electricity, heat production and supply industry saw profits jump 73.5 percent in the first seven months, and manufacturers of computers, telecommunication and electronics saw their profits rise 29 percent.

Tuesday's data came after a string of other economic indicators, from factory output and retail sales to foreign trade, showed the world's second-largest economy may be gradually stabilizing after a protracted slowdown.

Among the latest evidence, HSBC's preliminary reading for China's manufacturing sector showed the Purchasing Managers Index (PMI) rose to 50.1 in August, the highest level in four months.

"China has shown clear signs of stabilizing and the country is on track to meet its annual growth target of 7.5 percent," NBS spokesman Sheng Laiyun said at a Foreign Ministry conference on Monday.

China's economic growth eased to 7.5 percent in the second quarter, down from 7.7 percent in the first three months.

Instead of initiating a massive stimulus program to lift the economy, the authorities are moving cautiously, including speeding up shantytown renovation, accelerating railways and infrastructure investments and reducing taxes for small businesses, to steady growth while driving through reforms for long-term good.

As these policies filter through, China's economy is showing mounting signs of stabilization that has prompted the scale-up of growth forecast for the second half of the year.

Deutsche Bank has recently raised its forecast for China's GDP growth in the second half to 7.7 percent from its previous estimate of 7.6 percent, and Credit Suisse tuned up the annual growth forecast from 7.4 percent to 7.6 percent.