Chinese Industrial YOY Profits up 15.5% May 2013

The National Bureau of Statistics of China has issued a report today stating that the industrial profits of Chinese enterprises reached 470.55 billion Yuan ($76 billion), which is an increase of 15.5% since May 2012. Profits of state owned companies also increased by 5.7% during the same period. Analysts had predicted a rise of just 7-8% for industrial firms’ profits.

Profits Up

Profits Up

Only yesterday analysts were suggesting that the slowdown in the economy was going to take a hold on profits and slow that to just 7-8%. They also stated that they were going to fall even more in the months to come. So, how come the roundabout turn in frog-march fashion with the hike in industrial profits that is up by double the estimates that were being predicted? It certainly begs the question as to the veracity of such statistics. We all heard about the fact that China was faking export data back at the end of May.

Analysts believed there to be even negative activity with regard to economic growth by the 3rd quarter of this year. The suggested figure of 7-8% for profits was a reduction in comparison with April’s yoy figure of 9.3%. But, now, according to the National Bureau of Statistics, figures have shot through the roof. This all comes at the same time when the baking sector is suffering from liquidity setbacks causing tapering in the number of loans being made to small businesses and individuals. It would seem highly dubious as to whether the figures are indeed true given the fact that two of the largest banks have cut back on lending.

The analysts were obviously basing their predictions upon the dull prospects regarding economic growth this year being experienced by China. Chinese exports had their lowest percentage increase this year and showed signs of a considerable slowdown in economic activity. Imports also fell by 0.3% in May in comparison with the previous year (whereas it was expected that there would be a 6% increase). Exports to the USA dropped by 1.6% in May from one year ago. The USA is China’s number one importer.

Much has been said about the growing fears that China doesn’t have such a healthy economy as they might have the rest of the world believe. First-quarter results showed only an increase of 7.7% in GDP growth, which was considered as the alarm bells ringing announcing the bubble bursting. Between January and March 2013, China had the worst economic growth it has experienced in three years.

Analysts have suggested now that investors should not be looking at monthly data as rebounds may temporarily occur, but that overall the Chinese economy is faltering. Tis will probably get worse as the credit crunch and the lack of liquidity deposits hits some of China’s banks hard in the coming months. That being said, there are still quite a few elsewhere in the world that would sell their grannies to get that sort of figure! But if the Shanghai Composite is anything to go by, it signaled today that investors are doing their own thing. The Shanghai Composite was down by 0.08%, by 1.48 points to 1, 950.01.

President Xi Jinping stated mid-May that he would tackle fiscal reform in the country as well as liberalize interest rates. However, injection of stimulus into the economy was out of the question back then. Will this be enough to maintain the hike?

National Bureau of Statistics

National Bureau of Statistics

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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