China is Not all Bad News

China is Not all Bad News

China is Not all Bad News

The National Bureau of Statistics (NBS) said Wednesday that profits of China’s major industrial firms rose 6.2 percent year on year in H1, narrowing from a 6.4-percent rise registered in the first five months.

The sector for electronic product manufacturing saw profits surge 15 percent year on year in H1, a sharp contrast to losses in some traditional sectors, including the mining, tobacco and power supply sectors.

Such divergence came as China sought to raise the quality and efficiency of growth and substitute traditional drivers with new forces.

For instance, the output of high-tech manufacturing rose 10.2 percent year on year in H1, higher than the 6.9 percent increase for the whole manufacturing sector.

Some sectors with severe overcapacity, such as crude steel, electrolytic aluminum and ship building, dropped to different extents. Cement output rose by only 3.2 percent.

“Different paces inside the manufacturing sector show that the transition from old to new impetus is accelerating,” said Huang Libin, an official with the Ministry of Industry and Information Technology.

Different growth paces were also reported among different regions, showing new progress in China’s restructuring efforts.

In the first half, both the industrial output and fixed-asset investment in central and western China expanded faster than the more developed eastern region.

Meanwhile, the service industry accounted for 54.1 percent of the country’s GDP in H1, up 1.8 percentage points from a year earlier. Final consumption contributed to 73.4 percent of its GDP growth, up by 13.2 percentage points year on year.

“The quality of China’s economic activity is improving, and positive factors are increasing,” according to NBS spokesperson Sheng Laiyun.

Sheng also noted signs of strengthening; encouraging data on new company registration, the booming high-tech sector and new business models such as online sales.

China’s economy remained generally stable in H1, but divergence also remained.

China’s GDP expanded 6.7 percent in Q2, the lowest growth rate since the global financial crisis in early 2009.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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