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China a profit center for US companies in Q2

U.S. companies are finding China to be a solid source of profit growth based on their strong second-quarter earnings and revenue, Reuters reported.

Caterpillar Inc. reported its sales in Asia-Pacific rose 25% in the second quarter. Its shipments of large excavators to customers in China more than doubled in the first half.

A report by the American Chamber of Commerce in Shanghai showed that 82% of U.S. companies based in China expect revenues to increase in 2017, up from 76% a year ago.

U.S. companies are reaping benefits from a host economy that is growing at almost 7%; a housing boom; and a weak U.S. dollar, which makes American exports more competitive and increases dollar earnings. Chinese President Xi Jinping's plan to build a new Silk Road, which would entail billions of dollars to be spent on new roads, bridges, railways and power plants, is also helping U.S. firms sell heavy equipment and other products.

Skywork Solutions, which sources about 85% of its chip sales from China, said its third-quarter revenue rose 20%, partly from demand from Chinese phone maker Huawei Technologies Co. Ltd.

Some sectors, however, are facing the heat from the competition. Margins are being squeezed and U.S. automaker General Motors Co. said it faced "pricing challenges" even as it reported a strong second quarter.

It is unclear how long China's economy can sustain its robust growth. "The strong rebound is largely being driven by the property market and export growth, which both seem unsustainable," said Yang Zhao, Nomura's chief China economist. Yang expects China's economic growth to cool by the fourth quarter, Reuters said.