China: Big jump in industrial profits – ING

Iris Pang, economist at ING, notes that Chinese industrial profits grew by 5.4% year on year in November after a contraction of 9.9%YoY in October, marking the fastest growth in 2019 except in March.

Key Quotes

“In terms of the growth rate of profits, ferrous metal mining had a 170.7%YoY year-to-date increase in profits in November.”

“From another perspective, if we rank the operating profits of the reported manufacturing industries, the biggest operating profit industry, which is the computer, telecommunication, and electronic equipment industry, earned a profit of CNY 10.2 trillion YTD in November that grew by 4.1%YoY year-to-date.”

“The trade war continued to damage export-related manufacturing activities. As long as the 'phase-one' deal is not signed, the tariffs imposed on China's export to the US will not be rolled back. But, even if the 'phase - one' deal is signed, the rollback of tariffs, according to the media, will be just 7.5% on $120 billion goods, which is too small to stop damages on overall Chinese exports.”

“Because of the two growth engines in 2020 - infrastructure projects and 5G - industrial profits are expected to enjoy positive growth in 2020.”