Profits of the Chinese industrial companies have reportedly been revamped to growth during the first two months of this year. The profit has grown at its fastest pace in more than eighteen months indicating positive impact of the stimulus measures adopted for the manufacturing sector of China. Growth in profit has been reported ignoring weakening business conditions and ever slowing growth in the world's second largest economy.
China's economy has been witnessed to grow at its weakest pace during the last 25 years. However, analysts have forecast for a further slowdown during this year. The manufacturing sector has been observed to withstand the hardest hit since rampant excess capacity and weak demand have led to price declines, according to a report published in Financial Times.
Meanwhile, easing the monetary policy has fuelled a modest revival in housing construction. According to analysts' observations, the increased fiscal spending on infrastructure has also contributed for increasing demand of China's industrial produce.
The Chinese industrial firms have recorded 4.8% rise in profits during January and February compared to that of a year ago. The total profit during the two-month period has been recorded at ¥780.7 billion (S$164 billion), reports The Straits Times citing data revealed by the National Bureau of Statistics (NBS) on Sunday. NBS furnished data also shows that the industrial profits have been witnessed to fall by 4.7% during December. Recent rise in industrial profits ends a seven months lingering negative growth span while marking the fastest growth since July 2014. The Chinese real estate construction has exposed major excess capacity while unleashing relentless downward pressure on margins. However, the sales and profit margins in sectors exposed to the consumers are holding up much better compared to the real estate sector. Employment has also been cut in the worst hit sectors, analyzes The Irish Times quoting Louis Kuijs, head of Asia for Oxford Economics in Hong Kong. NBS publishes a single figure for the first two months of each year to eliminate seasonal distortions from the irregular timing of the lunar New Year holiday. Producer price inflation has remained negative for the 48th consecutive months. But price declines have been narrowed in February which helps in boosting up profits. Signs for increasing the prices of global commodities especially crude oil and iron ore have also appeared as welcoming news for Chinese industrial sectors. The historic low prices of crude oil and iron ore have been held responsible for increasing the deflationary pressure.
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