China’s Industrial Profits Jump Again as Doubts Cloud Data

(Bloomberg) -- Profit growth at Chinese industrial companies continued a streak of surges for the third month, as the statistics authorities tried to dismiss doubts on the credibility of such data.

Industrial profits advanced 20.0 percent in June from a year earlier, versus a 21.1 percent increase in May. Total profits for the month were 658.29 billion yuan ($96.7 billion), the National Bureau of Statistics said Friday.

A jump in producer prices, which accelerated to the fastest pace this year in June, bolstered the gain even as industrial output slowed more than expected. With factory inflation forecast to slow this year and proposed tariffs weighing on orders, such resurgence in earnings may not be sustainable.

"The profit growth is very healthy with reduced costs and robust inflation, " said Liu Peiqian, Asia strategist at Natwest Markets PLC in Singapore. "It may stabilize and gradually slow down rest of this year, but we would not rule out a rebound in the event of strong stimulus."

The data series has recently attracted controversy, as the nominal value in May indicates a net decline while NBS reported a surge of more than 20 percent. The data mismatch showed up again this month. A simple calculation indicates a 9.5 percent decline in June from 727.78 billion yuan a year earlier, instead of a surge.

China’s Industrial Profits Jump Again as Doubts Cloud Data

The discrepancies are due to changes in the survey sample, which covers only industrial firms with over 20 million yuan in annual revenue, and the gauge can "accurately, objectively" reflect changes at the companies, a spokesman at the bureau said at a briefing earlier this month. Closer scrutiny on the reported statistics as well as a crackdown on double accounting and over reporting have also led to the difference, according to the spokesman.

The profit boom benefits state companies more than others. Profits of state companies surged 31.5 percent in the first six months from a year earlier versus a 10 percent gain at the private firms and a 8.7 percent rise at the foreign ones, according to an NBS statement.

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