2nd LD-Writethru: China's industrial profits return to growth

Profits of China's major industrial firms rose 4.8 percent year on year in the first two months of 2016, reversing last year's downward trend, official data showed Sunday.

Profits at industrial companies with annual revenues of more than 20 million yuan (about 3.1 million U.S. dollars) totaled 780.7 billion yuan during the January-February period, the National Bureau of Statistics (NBS) said.

The profits registered a 4.7 percent year-on-year fall in December and a 2.3 percent annual decrease in 2015.

He Ping, an official with the NBS department of industry, attributed the latest profit growth to increased sales and a milder decline in factory product prices.

In the first two months, revenues from the firms' primary business climbed 1 percent year on year, improving from a 0.6 percent drop in December and a 0.8 percent increase for last year.

In the January-February period, China's producer price index, which measures the prices of goods at the factory gate, slipped 5.1 percent year on year, narrowing from a drop of 5.9 percent in December and 5.2 percent for 2015.

JZ Securities economist Deng Haiqing viewed the industrial profits' return to growth as a more certain signal of improving economic fundamentals.

Downstream demand is restoring, Deng said, citing a faster growth in property investment, which contributes a significant part of China's economy and creates orders for a variety of industrial goods.

Investment in China's property sector rose 3 percent year on year in the first two months of 2016, higher than the 1-percent rate for the entirety of 2015.

Oil refining, electrical machinery and food industries contributed most of the industrial profit growth in the first two months, NBS data showed.

Private firms outperformed the state sector, with profits up 7.5 percent year on year, compared with a 14.5 percent plunge in profits of state-owned industrial producers.

Despite the recovery, part of the industrial profit growth was a result of the lower base in the same period of last year, He noted.

Industrial profits dipped 4.2 percent year on year in the January-February period of 2015, NBS data showed.

Compared with the same period of 2014, industrial profits this year only inched up 0.4 percent, said He, while acknowledging that the industrial sector still faced difficulties, including a battered mining industry and huge overcapacity.

The industrial glut, along with weakening foreign trade and a cooling property sector, dragged down China's GDP growth to 6.9 percent in 2015, the lowest rate in 25 years. Endi