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China Industrial Profits Growth Retreats from Three-Year High

China Industrial Profits Growth Retreats from Three-Year High

David Cottle, Analyst


Talking Points:

  • China’s September industrial profit rise fell well short of the previous month
  • Markets took the data calmly as it marked a pullback from a three-year peak
  • China economic stabilization thesis seems to remain intact for the time being

China’s industrial profits for September have failed to match the previous month’s vigor.

Profits rose 7.7% on the year, according to the National Bureau of Statistics. They hit 557.1 billion yuan ($85 billion) and have risen 8.4% between January and September.

This is way below the 19.5% rise recorded in August. But that was a three-year high, and offered worried China-watchers more hope that the economy was stabilizing.

The markets had not been expecting a repeat of that stunning performance. However, September’s rise is also some way below the 11% growth profit recorded in July.

Still, investors seem to be taking the data calmly enough in what had been a pretty torpid Asian morning session.

The Australian Dollar, their favourite liquid China-risk proxy, remained steady on the figures. It bought US0.7637 right before the release and US0.7361 just after the data.

The Aussie is often used to place bets on the Chinese economy. It’s a freely floating currency and its home country has very strong commodity export links with its huge northern neighbour.

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

Chinese industrial firms' liabilities at the end of September were 4.7% higher than at the same point last year.

The world’s second-largest economy has posted three straight quarters of 6.7% growth, keeping expansion on track to meet the government’s objective.

Years of factory-gate price deflation also seem to be fading out, with producer prices up last month for the first time since 2012, as global commodity prices creep back up.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.