Firms see faster profit growth B2

Data shows economic momentum, greater efficiency

China’s major industrial firms saw stronger profit growth in the JanuaryFebruary period of this year, data released by the National Bureau of Statistics (NBS) showed on Tuesday.

Industrial profits rose to 968.9 billion yuan ($154.57 billion) in the first two months of this year, up 16.1 percent year-on-year and 5.3 percentage points higher than the growth registered in December, according to the NBS.

NBS statistician He Ping attributed the faster profit growth to the quickened pace of industrial production and sales, which helped offset weaker prices.

With supply-side structural reform having been promoted, industrial firms’ costs have been further lowered, He said in a statement on the NBS website on Tuesday.

In the first two months, the costs for revenue of 100 yuan were reduced by 0.33 yuan from the same period last year, He noted.

Dong Dengxin, director of the Financial Securities Institute at the Wuhan University of Science and Technology, said that the profit growth figure for the start of the year indicates the steady growth of China’s economy, even though it is hard to predict the full-year trends from the first two months, due to the effect of the country’s Spring Festival holidays.

Along with the strong profit growth, industrial firms’ operational quality continued to improve, he noted, which was evident in the higher capital efficiency.

Among the 41 industries, 29 posted year-on-year profit growth during the first two months, with oil, coal, gas and textiles all reporting faster growth.

“Traditional industries are still playing a major role in boosting profits, even though in the long run we should pay more attention to the high-end manufacturing and newly emerging sectors,” Dong told the Global Times Tuesday.

The leverage ratio in Chinese industrial enterprises also declined, falling to 56.3 percent at the end of February, down 0.8 percentage points year-on-year. The figure for State-owned enterprises (SOEs) was 59.6 percent, down 1.4 percentage points year-on-year, according to the NBS.

“The reduction in the leverage ratio indicates the country’s determination to strengthen regulation through the deleveraging campaign,” Dong said, adding that it also showed “enterprises’ demand for capital has slowed.”

China’s financial risks are reflected in its leverage ratio, said Yi Gang, governor of China’s central bank, on Sunday during the China Development Forum held in Beijing. He highlighted indebted SOEs, local government debt and the relatively rapid growth in household debt.