Industrial profits keep on growing

2017-11-28
China Daily

Profits of China’s industrial firms continued their stable growth last month, which, analysts said, can be attributed to rising prices for industrial goods from the country’s supply-side structural reform and stabilizing economy.

Industrial profits in October rose by 25.1 percent from a year earlier to 745.4 billion yuan ($113 billion), the second-highest monthly rise this year after it jumped by 27.7 percent in September, the National Bureau of Statistics said on Nov 27.

In the first 10 months as a whole, those profits increased by 23.3 percent year-on-year, up from 22.8 percent in January to September, the NBS said. The NBS data cover large companies with annual revenues over 20 million yuan from their main businesses.

“Industrial profits remain on the track of stable growth, which points to ... macroeconomic recovery and increasing corporate profits,” said Xie Yaxuan, an analyst at China Merchants Securities.

China’s GDP growth stood at 6.8 percent in the third quarter and 6.9 percent in the first three quarters, higher than market expectations.

Upstream sectors like mining and chemical materials have contributed greatly to rising industrial profits, Xie said in a research note. China’s supply-side structural reform, which started in late 2015, has led to rising prices for some industrial goods as some production capacity has been cut.

More than half the increase in industrial profits in October came from mining, iron and steel smelting and processing, chemicals, and oil and natural gas extraction, He Ping, a senior NBS statistician, said. Profits in those sectors reached 603.4 billion yuan in the first 10 months, which was 51.2 percent of the total industrial profit increase from January to October.

But Xie said reform is only one reason for rising industrial profits. “External demand has become a core growth engine that has had higher-than-expected performance.”

From January to October, China’s industrial exports increased by 10.5 percent year-on-year, compared with zero growth registered in the same period last year, Xie said.

As profits grow, industrial firms have also seen their operational efficiency improve, said He of the NBS.

Corporate costs have been dropping in the first 10 months, when they consumed 92.84 percent of total main business revenues, down by 0.51 percentage point year-on-year, He said.

Corporate leverage levels also have declined, He said. By the end of October, the asset-to-liability ratio of industrial enterprises was 55.7 percent on average, down by 0.5 percentage point compared with a year ago.