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Asia300

China Inc. gushing black ink as resource giants triumph

January-March net profits jump 21%, but outlook still murky

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A PetroChina refinery in China's northwestern province of Gansu. The oil giant swung to a net profit of 5.7 billion yuan in the January-March quarter.   © Reuters

SHANGHAI -- Earnings at publicly traded Chinese enterprises are recovering as rising resource prices give the fortunes of oil and coal giants a big boost.

Listed companies' net profits totaled 617.3 billion yuan ($89.6 billion) for the January-March quarter, up 21% on the year, shows a Nikkei survey of 2,744 businesses and based on data from Chinese financial information provider Shanghai DZH. Sales surged 23% to 6.81 trillion yuan. The resources, real estate and automotive sectors contributed to nearly 50% of the growth in overall profit.

In the January-March quarter of 2016, aggregate net profit had dropped nearly 2%.

Earnings are picking up. But with the Chinese economy gradually losing steam, some wonder whether the recovery is sustainable.

In the resources sector, PetroChina swung to a 5.7 billion yuan profit from the year-earlier 13.7 billion yuan loss. Coal producer China Shenhua Energy saw net profit more than double to 12.2 billion yuan.

Real estate companies logged a nearly 40% gain in full-year net profit in 2016, with their profits soaring further by 49% in the first three months of this year. The surge came even amid Chinese efforts to get the bubble under control through such steps as telling banks to curb lending.

Companies in the auto industry posted a 23% increase in profit for the quarter, propped up by strong earnings at parts makers. But a reduction in the tax break for small cars weighed on sales at major automakers, hurting their bottom lines. Dongfeng Motor Group's net profit fell 40%, while SAIC Motor's rose just 4%.

Machinery makers benefited from the infrastructure investment boom, with their net profits nearly doubling after years of decline.

Although listed companies got off to a good start, there are voices expressing concern about an earnings slowdown in the second half.

Gross domestic product grew 6.9% in real terms last quarter, well above the official target of around 6.5% for 2017. Going forward, the government will likely keep its monetary policy rather tight in hopes of reducing risks in the financial and real estate markets. Signs of economic deceleration are already emerging, as in April statistics on personal consumption and fixed-asset investment.

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