Big industrial firms see strong profit growth

2017-12-21
China Daily

China’s major industrial firms saw strong profit growth and a decreasing debt ratio in 2017, amid an improving economy, deepening reform, and the government’s ongoing deleveraging efforts.

During the first 10 months of the year, total profits of industrial enterprises with annual revenue of more than 20 million yuan ($3 million) amounted to 6.25 trillion yuan, a 23.3 percent increase year-on-year, according to the National Bureau of Statistics.

In October alone, profits of major industrial firms rose 25.1 percent year-on-year, slowing from 27.7 percent in September, which was the strongest growth since 2011.

By the end of October, their debt-to-asset ratio dropped to 55.7 percent, 0.5 percentage point lower than a year ago.

Among the 41 industries surveyed, 38 posted year-on-year profit growth during the first 10 months, with industries such as coal, steel, chemicals and petroleum recording strong performance.

The profit growth was due to ongoing supply-side structural reform, which is focused on increasing high-tech production while reducing low-end capacity, said Li Jin, chief researcher at the China Enterprise Research Institute.

Li Yining, a leading economist at Peking University, said that the reform needed to be implemented to avoid path dependence, which had occurred in many developing countries and kept them stuck in poverty.

In 2016, China cut coal capacity by more than 290 million metric tons. This year’s target was 150 million tons, which was accomplished in October, according to the NBS.

By the end of August, the country had cut its steel capacity by more than 115 million tons. It also had phased out production of 140 million tons of low-quality steel made from scrap metal by the end of June.

In the first three quarters of 2017, 90 major coal enterprises, which account for around 70 percent of the country’s total coal output, recorded total profit of 104.1 billion yuan, with the top 10 coal enterprises’ profit amounting to 83.3 billion yuan, according to the China National Coal Association.

Major steel companies’ profit margins stood at 4.41 percent during the first 10 months this year, according to the China Iron and Steel Industry Association.

China Baowu Steel Group, the nation’s largest steel-maker, reported a 66.6 percent increase in net profit to 14.56 billion yuan in the first 10 months of 2017 on high steel prices. Its revenue was up by 55.4 percent year-on-year to 388.8 billion yuan during the same period, showing the benefits of integration and the deepening of State-owned enterprise reform.