China industrial profit growth accelerates in September despite cost pressures

BEIJING (REUTERS) – Profits at China’s industrial firms rose at a faster pace last month even as surging raw material prices and supply bottlenecks squeezed margins and weighed on factory activity.

Profits jumped 16.3 per cent on year to 738.74 billion yuan (S$155.9 billion), the statistics bureau said on Wednesday (Oct 27), quickening from the 10.1 per cent gain reported in August.

The industrial sector has been hit by the surging price of coal, supply shortages and power rationing triggered by coal shortages due to emission reduction targets.

But Beijing has taken a raft of measures to curb elevated metals prices and ease the country’s power crunch, including urging coal miners to boost output and manage electricity demand at industrial plants.

This month, the government said that it will allow coal-fired power prices to fluctuate by up to 20 per cent from base levels, enabling power plants to pass on more of the high costs of generation to commercial and industrial end-users.

For the January-September period, industrial firms’ profits grew 44.7 per cent year-on-year to 6.34 trillion yuan, slowing from a 49.5 per cent increase in the first eight months of this year, the statistics bureau said.

China’s economic growth in the third quarter was the slowest this year, due partly to power shortages and wobbles in the property sector.

Record high factory inflation last month is putting a strain on middle and downstream businesses to pass through costs to consumers.

Analysts polled by Reuters expect the People’s Bank of China to refrain from attempts to stimulate the economy by reducing the amount of cash banks must hold in reserve until the first quarter of next year.

Liabilities at industrial firms rose 8.2 per cent from a year earlier at end-September, easing from 8.4 per cent growth as at end-August.

The industrial profit data covers large firms with annual revenues of more than 20 million yuan from their main operations.

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