Double-digit industrial profit growth points to stabilizing economy

2017-04-27
Xinhua

BEIJING — China’s major industrial firms continued to post double-digit growth in profits in March, adding to signs of a stabilizing Chinese economy, official data showed on April 27.

The companies reported a 23.8-percent year-on-year profit growth last month, slowing from 31.5 percent in January and February but still much faster than the 8.5-percent increase in 2016, according to the National Bureau of Statistics (NBS).

In the first three months of the year, profits of major industrial firms rose 28.3 percent year on year, the NBS said in a statement.

The profit growth was supported by rising commodity prices, improved demand and expectations, as well as higher productivity, according to an analysis note from China Merchants Securities (CMS).

In the first quarter of 2017, major industrial firms saw profit margins of their primary business edge up 0.68 percentage points to 6.13 percent.

It was the first time the profit margin climbed above 6 percent since 2014, reflecting a better industrial structure and increased efficiency, the CMS said.

Meanwhile, the companies’ debt-asset ratio dropped 0.7 percentage points to 56.2 percent.

NBS statistician He Ping noted the profit growth in March was of higher quality, as consumer product and equipment manufacturing accounted for a larger share of all newly-generated profits than in the January-February period, while the share of mining and raw material industries fell.

The manufacturing industry reaped 1.49 trillion yuan ($216.2 billion) of profits in the first three months, accounting for 87.5 percent of overall industrial profits, and up 23.4 percent year on year.

The industrial sector, which accounts for about a third of China’s GDP, started to pick up last year after profit declines in 2015, helped by government efforts to cut overcapacity and a recovery in the property market.

Value-added industrial output expanded 6.8 percent year-on-year in the first three months, accelerating from 6.3 percent in January and February, and 6 percent in 2016.

“The sector was off to a good start in the first quarter, with some indicators, industries and regions performing better than expected,” Zheng Lixin, spokesperson of the Ministry of Industry and Information Technology, said on April 26.

The upbeat profit data came after a slew of other indicators suggesting improvement in the Chinese economy.

The country’s manufacturing purchasing managers’ index (PMI) came in at 51.8 in March, higher than the 51.6 recorded in February and staying above the boom-bust mark for the eighth month in a row.

Unemployment fell 0.05 percentage points to 3.97 percent at the end of March from three months earlier, as more new jobs were created.

However, as commodity prices retreat, upstream industries may lose steam and drag down the overall industrial profit growth in future, the CMS said.

“Coal, oil and steel industries already posted slower profit increases in March,” said He, who also warned of pressure from rising costs and financial expenses.

The annual industrial profit growth for this year will moderate to 15-20 percent, the CMS said.

China’s GDP expanded 6.9 percent year on year in the first quarter, up from the 6.8-percent growth in the previous quarter and 6.7 percent in 2016.

It also beat previous market expectations of 6.8 percent and came well above the annual growth target of around 6.5 percent.