Industrial profits up 17.1% in Jan-July

Rising purchasing prices trimmed figures: NBS

China’s major industrial firms posted steady profit growth in the first seven months of 2018, official statistics showed on Monday.

Profits at China’s major industrial firms grew 17.1 percent in the first seven months, slightly down from the 17.2 percent expansion for January-June, according to the National Bureau of Statistics (NBS).

In July alone, combined profits at industrial companies with annual revenue of more than 20 million yuan ($2.9 million) went up 16.2 percent year-on-year, retreating from the 20 percent gain in June.

The narrowing expansion of factory-gate prices and rising purchasing prices dragged down the profit growth in July, said NBS statistician He Ping.

In the first seven months, costs per 100 yuan of revenue dropped 0.38 yuan from the same period last year, according to He.

The debt-asset ratios of major industrial firms dropped 0.5 percentage points year-on-year to 56.6 percent by the end of July. He gave credit to the country’s supply-side structural reforms, which led to lower production costs and leverage ratios.

Among the 41 industries surveyed, a total of 32 posted year-on-year profit growth during the first seven months.

Manufacturing, which accounted for 84.7 percent of total industrial profits, saw the sector’s combined profits expand 14.3 percent. The mining industry surged to 53.4 percent, while sectors such as power generation, heating, fuel gas and water supply companies went up 17.8 percent.

The slowdown in China’s industrial profits could translate into a weakening in investment in the manufacturing sector, according to Betty Wang, senior China economist at ANZ.

China’s investment growth may slow in the future and authorities will continue to make good use of fiscal and financial policy, the State planner said on Monday.

Weakening consumption, rising credit defaults, high financing costs and escalating Sino-US trade tensions will likely pressure Chinese firms’ profit growth even further in the coming months, analysts at Nomura said in a note.

However, industrial profit growth is unlikely to see a huge decline, Wang said. China’s efforts to reduce industrial overcapacity and reduce air pollution will continue to help boost commodity prices.

The country is also speeding up infrastructure spending to boost investment growth and keeping liquidity reasonably ample to prop up growth, while ruling out a return to strong stimulus seen in the past which could add to high debt levels.

Officials have also said they will offer more help to companies that are struggling with high costs or having trouble obtaining financing.

Chinese Finance Minister Liu Kun said that taxes and fees will be cut by more than 1.1 trillion yuan this year.