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China's industrial sector is profitable again

Photo by China Photos/Getty Images

Chinese industrial profits grew by 4.8% to 780.7 billion yuan ($US119.8 billion) in January and February compared to the same period a year earlier, marking the first annual increase recorded in seven months.

Although it’s the fastest annual acceleration seen since mid-2014, Vivek Dhar, a mining and energy commodities analyst at the CBA, notes that headline may have been flattered by a weak performance seen over the same period in 2015.

“While the data showed that 28 out of the 41 industry groups in China posted profits, the sector still faces difficulties,” wrote Dhar, citing analysis from China‚Äôs National Bureau of Statistics (NBS). “The group said a low-base for comparison may explain the growth in profits and that inventory pressures remain quite large.”

Dhar suggests that while mining and energy commodity prices will likely respond positively to the data, the nation’s demand for industrial demand for commodities “remains weak and will likely slow further this year”.

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