China’s industrial profit growth quickens amid resilient economy

China’s major industrial firms posted increased profit growth in the first five months, data showed Wednesday.

Profits at China’s major industrial firms grew 16.5 percent in the first five months, quickening from the 15-percent expansion for the January-April period, according to the National Bureau of Statistics (NBS).

In May alone, combined profits at industrial companies each with annual revenue of more than 20 million yuan (about 3 million U.S. dollars) went up 21.1 percent year on year, slightly retreating from the 21.9-percent gain in April.

NBS statistician He Ping attributed sound growth to the country’s supply-side structural reforms, which led to falling production costs and lower leverage ratios.

In the first five months, cost per 100 yuan of revenue dropped 0.35 yuan from the same period last year, according to He.

The debt-asset ratios of major industrial firms dropped 0.6 percentage point year on year to 56.6 percent by the end of May.

Along with falling raw materials cost, rising factory-gate prices also helped drive the profit growth. In May, the producer price index (PPI), a measure of industrial product inflation, went up 4.1 percent year on year, the highest growth in four months.

Among the 41 industries surveyed, 31 posted year-on-year profit growth during the first five months.

Manufacturing, which accounted for 84.8 percent of the total industrial profits, saw the sector’s combined profits expand 13.8 percent. The mining industry’s profit surged 41.6 percent, while those of power generation, heating, fuel gas, water production and supply companies went up 26.1 percent.

Wednesday’s data were the latest in a slew of economic indicators that showed China’s economic resilience, which prompted global institutions such as the World Bank to raise its GDP forecasts for the country.

Earlier data showed growth in energy consumption, freight traffic and producer prices all picked up last month, pointing to a firming real economy and progress in structural transformation.

China’s economy expanded 6.8 percent year on year in the first quarter, above the target of around 6.5 percent.

Earlier this month, the World Bank upgraded its forecast for China’s economic growth in 2018 to 6.5 percent, 0.1 percentage point higher than its January forecast.

The World Bank’s latest China Economic Update said that economic activity had remained resilient, and the new economy was now a more prominent source of growth.

Last month, Morgan Stanley raised its forecast on the pace of China’s economic expansion for this year and 2019 in a research note, saying growth had become more sustainable and less reliant on credit.

The New York-based investment bank expects China’s GDP to rise 6.6 percent year on year in 2018, up from its previous projection of 6.5 percent. Its forecast for 2019 improved from 6.3 percent to 6.4 percent.

Comments

No comments yet. Why don’t you start the discussion?

Leave a Reply

Your email address will not be published. Required fields are marked *