Chinese industrial profits surge on the back of higher commodity prices

Wang He/Getty Images

Commodity prices have been ripping higher over the past year, helping to boost inflationary pressures and optimism towards the health of the global economy.

And they have also been useful in boosting the profitability of Chinese industrial firms.

In the first two months of the year, China’s National Bureau of Statistics (NBS) said that industrial profits jumped to 1.01 trillion yuan, a massive 35% increase on the levels reported one year earlier.

That was a marked step-up from the 2.3% increase reported in the year to December, and was largely due to firmer commodity prices.

“The increase was mostly due to faster growth in prices of coal, steel and crude oil, said He Ping, an official at the NBS, following the release of the data.

Over the same period, liabilities of industrial firms grew by a smaller 6.6%.

The lift in industrial profitability has been helped by a noticeable acceleration in infrastructure and residential construction activity over the past year as Chinese policymakers rolled out fiscal stimulus to bolster flagging economic activity in the early parts of 2016.

And that has continued in early 2017.

According to separate data released by the NBS earlier this month, urban fixed asset investment — spending on urban infrastructure such as factories, roads, power grids and property — grew by 8.9% in January and February compared to the same period a year earlier, above the 8.1% increase recorded over the entirety of 2016.

“We continue to believe that China will look to infrastructure investment in 2017 to drive growth as China’s top leaders prepare for elections in November,” said Vivek Dhar, a mining and energy analyst at the Commonwealth Bank, following the release of the NBS report.

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