In­dus­trial prof­its rise 16.1% in 2 months

Pol­icy sup­port to re­duce costs and higher sales help boost growth

China Daily European Weekly - - FRONT PAGE - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

The na­tion’s in­dus­trial prof­its grew sig­nif­i­cantly in the first two months of the year, thanks to pol­icy sup­port to lower costs and higher sales off­set­ting weaker price rises.

In­dus­trial prof­its in­creased by 16.1 per­cent to 968.9 bil­lion yuan ($155 bil­lion; 124 bil­lion eu­ros; £109 bil­lion) in the Jan­uary-Fe­bru­ary pe­riod com­pared with the same pe­riod last year, up from the 10.8 per­cent growth in De­cem­ber, data from the Na­tional Bureau of Sta­tis­tics showed on March 27.

Profit growth in sec­tors such as oil and nat­u­ral gas ex­trac­tion and phar­ma­ceu­ti­cal man­u­fac­tur­ing helped drive up the over­all profit growth, ac­cord­ing to the NBS.

Bet­ter-than-ex­pected de­mand in the first two months led to stronger growth of in­dus­trial prod­uct sales, which helped to off­set the down­ward pres­sure from slower price rises, ac­cord­ing to Liang Jing, an an­a­lyst with the re­search in­sti­tute of Bank of China.

In the first two months, in­dus­trial added value in­creased by 7.2 per­cent year-on-year, up by 1 per­cent­age point com­pared with De­cem­ber.

Rev­enue from com­pa­nies’ ma­jor busi­nesses in­creased by 10 per­cent year-on-year in the first two months, which is 1.2 per­cent­age points higher than in De­cem­ber.

An­a­lysts ex­pect slower profit growth in the fu­ture due to the high base ef­fect in the past sev­eral months, but they ex­pect rel­a­tively strong growth in the medium to long run as the growth mo­men­tum per­sists.

Gao Ming, an an­a­lyst with China Mer­chants Se­cu­ri­ties, says gov­ern­ment sup­port im­ple­mented since last year, such as ef­forts to lower pro­duc­tion costs and tax cuts, will con­tinue to help in­crease the ef­fi­ciency of in­dus­trial pro­duc­tion.

He ex­pects in­dus­trial profit growth will in­crease by around 13.2 per­cent this year.

While many man­u­fac­tur­ing sec­tors failed to see ma­jor im­prove­ments in profit growth in the first two months due to cycli­cal fac­tors, gov­ern­ment sup­port to lower en­ter­prises’ debt lev­els will en­cour­age en­ter­prises to re­struc­ture to achieve more sus­tain­able profit growth in the long run, ac­cord­ing to Gao.

The over­all debt level of Sta­te­owned en­ter­prises has been de­clin­ing steadily as the gov­ern­ment im­ple­ments mea­sures to help en­ter­prises im­prove as­set qual­ity.

Some promis­ing signs can be found in en­ter­prises’ fi­nan­cial per­for­mance, re­flected by im­proved cash flows, higher in­vest­ment re­turns and im­proved per­for­mance of in­ven­to­ries, ac­cord­ing to a re­search note by China In­ter­na­tional Cap­i­tal Corp.

The prof­itabil­ity of con­sumer-re­lated man­u­fac­tur­ing en­ter­prises is ex­pected to see con­tin­ued im­prove­ment, in­clud­ing food and con­sump­tion-up­grade-re­lated in­dus­tries, ac­cord­ing to CICC.

GENG YUHE / FOR CHINA DAILY

A tech­ni­cian in­spects a new coal-min­ing ma­chine at an equip­ment man­u­fac­tur­ing com­pany in Lianyun­gang, Jiangsu prov­ince.

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