China’s industrial profits returned to growth in the first two months of 2016, partly due to a recovery in the property market despite an otherwise struggling economy.
Profits earned by Chinese industrial firms in January and February combined rose 4.8% from a year earlier, totalling 780.7bn yuan (£84bn) in the two-month period, according to the National Bureau of Statistics (NBS).
That compared with an annual fall of 4.7% in December 2015, which was the seventh straight month of decline.
“The recovery in property investment has helped industrial profits return to positive growth,” said Zhang Wenlang, an analyst at CITIC Securities. “Looking forward, industrial profits are likely to grow this year thanks to improved household consumption, a recovery in property investment and a halt in the slump in commodity prices.”
China’s real estate investment rose 3% in the first two months of 2016 in year-on-year terms, quickening from an increase of 1% in the full year of 2015.
The positive trend was also driven by quicker product sales of industrial firms and a slower decline in industrial producer prices, said NBS. The oil processing, electrical machinery and food sectors also contributed significantly to the growth in profits, it added, saying the sectors benefited from lower oil prices.
China’s premier Li Keqiang said last week that the country has enough policy tools to keep the economy stable despite “deep rooted” structural problems and downward pressure.
Chinese leaders have set an economic growth target of 6.5% to 7%for this year, introducing a range rather than a more precise target as it seeks greater flexibility in juggling growth, job creation and restructuring of a host of “zombie companies” in bloated industries.