China’s industrial profits get boost from steel, refining

Bloomberg

Profits of China’s industrial corporations are holding up this year thanks to a boost from steel and refining, even as last month’s earnings slowed from a three-year high.
Industrial profits in January-September rose 8.4 percent from a year earlier to 4.64 trillion yuan ($685 billion), the National Bureau of Statistics said Thursday. Earnings last month rose 7.7 percent in September from a year earlier to 577.1 billion yuan, less than the jump of 19.5 percent in August that was the biggest in three years.
“The figures aren’t bad in fact, especially in the state sector, which is doing very well,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “The biggest challenge facing companies is to strike a balance between cutting debt and making a profit. Controlling debt risk now becomes a priority for the government as corporate profits have been stabilized.”
Steel production is leading the charge with a 272.4 percent jump in the fist nine months versus a year ago, followed closely by a 263.8 percent jump for oil
refining earnings. Years of deflation for factories has abated,
with producer prices up last month for the first time since 2012, as global commodity prices recover and stimulus supports domestic demand.
With the economy stable, policy makers are stepping up efforts to curb risks from rampant growth in shadow banking products, elevated corporate debt and surging home prices.
Early private indicators for October give mixed readings, reflecting tension between resilient domestic demand and fresh challenges as policy switches to reining in financial risks.