CHINESE companies reported a sharp profit upturn in the second quarter this year. Total earnings increased by 18 per cent year on year for all listed firms. If banks and petroleum firms were excluded, profits would have been a lot higher at 36 per cent. The positive feedback loop between profits and business activities has further to run. The sharp increase in earnings is due to a combination of rising sales and improving margins, underscoring a marked ease in deflationary pressures and a significant pickup in business activity in nominal terms. Secondly, the improvement in earnings is broad-based. Materials producers and energy companies have experienced a massive profit boom, particularly steelmakers....
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