Industrial profits rise 16.1% in 2 months
Policy support to reduce costs and higher sales help boost growth
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.
A technician inspects a new coal-mining machine at an equipment manufacturing company in Lianyungang, Jiangsu province.