China’s August industrial profits increase nearly 20%

Profits of China's industrial profits were up the most in three years, adding to evidence that manufacturing had stabilised, which had boosted the prospects of borrowers' ability to repay their debt.

Industrial profits increased 19.5 per cent in August as against a year earlier to 534.8 billion yuan ($80.2 billion), China's National Bureau of Statistics (NBS) said on Tuesday.

That completed August data showing new credit, industrial output, fixed-asset investment and retail sales picked up and beat estimates of analysts.

Also, private indicators showed upbeat sentiment in business confidence and higher factory activity continued in September.

"The pickup in industrial profit is driven by commodities prices and the property market boom, in line with recovering factory-gate prices, which will turn positive this year," said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd in Hong Kong, Bloomberg reported. He added, improving profits signaled companies were more able to repay debt.

Economists had increased their 2016 GDP forecasts for growth on increasing evidence the government's fiscal support had helped successfully underpin the economy.

They had also cut back on additional monetary stimulus with policy makers changing gears to reign in surging home prices in some of China's biggest cities.

Meanwhile, the second-largest economy in the world has seen some stabilisation, supported by a housing boom and government spending, but growth has not been consistent and companies in some sectors such as steel had not fared well due to excess capacity.

Industrial profits in August had shown positive changes and government policies continued to produce effects, NBS official He Ping said in a statement accompanying the data.

He added rapid growth in August was also boosted by a low base of comparison last year. He said the country's traditional industries continued to struggle, especially in sectors hobbled by overcapacity.