“Surged” vs. “Starting to slow”

Xinhua:

From January to July, industrial companies with annual revenue over 20 million yuan (about 3 million U.S. dollars) reported total profits of more than 4.2 trillion yuan, 21.2 percent more than the same period in 2016, the National Bureau of Statistics (NBS) said in a statement. The growth rate was slightly slower than the 22 percent in January-June but much faster than the 8.5 percent increase in 2016.

The corporate leverage ratio continue to decline. Debt-asset ratios of major industrial firms dropped 0.7 percentage points year on year to 55.8 percent by the end of July. In the meantime, the profit rate of major industrial companies rose by 0.33 percentage points to 5.97 percent in July. The NBS statistician also highlighted the strong performance of state owned major industrial companies whose profit surged 34.2 percent in July year on year. In June, their profit increased 20.7 percent, the NBS said.

SCMP:

Profits earned by China’s industrial companies in July rose 16.5 per cent from a year earlier to 612.7 billion yuan (US$92.2 billion), slower than the previous month, the statistics bureau said on Sunday. That was the slowest rate of growth since profits rose by 14 per cent in April. The manufacturing sector, which accounts for 88 per cent of industrial profits, saw profit growth of 18.1 per cent in the first seven months, down only slightly from the 18.5 per cent recorded in the first half. But analysts say economic growth is starting to slow as measures to cool heated property prices and clamp down on riskier forms of lending put the brakes on activity. Beijing’s efforts to reduce debt have pushed up lending rates, signalling tighter margins and tougher operating conditions

One’s bullish, one’s bearish, etc. (Happens in other areas of life too.) Meanwhile, a SCMP commentator says that the whole thing’s a Ponzi scheme. If so, it’s the longest in history, much longer than Madoff. We’re not saying it can’t happen, though we tend to be more on the side of Stephan Roach in these matters. Technology advances plus a very high savings rate are important buffers.

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