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15 July 2015

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Industrial Profit Growth back in Positive Territory

2019-06-28 Download Print Comment
The profit growth of China's industrial companies returned to positive territory in May as sales quickened, with the private sector and high-tech manufacturers registering notable improvements, the National Bureau of Statistics said on Thursday.
 
To cement the improving momentum of the economy, policymakers should strengthen countercyclical measures and keep pushing economic restructuring forward, analysts said.
 
Major industrial companies saw their total profits grow by 1.1 percent year-on-year in May, reversing a slide of 3.7 percent in April, the NBS said.
 
During the first five months, industrial profits totaled 2.38 trillion yuan ($346 billion), down 2.3 percent year-on-year. The decline narrowed by 1.1 percentage points from the January-April period, according to the NBS.
 
Behind the recovery in profits were boosted sales and reduced costs, Zhu Hong, an NBS official, said in a statement. "Sales growth quickened sharply in May, with industrial revenue up 5 percent from a year earlier, versus a decline of 0.7 percent in April."
 
Meanwhile, growth in overhead expenses was 6.2 percent in May, down 1.9 percentage points from April, Zhu said.
 
Structural improvements also emerged, with profits of high-tech manufacturing industries up 6.2 percent in May, versus a 15.1 percent decrease in April. Privately owned industrial companies recorded a 6.6 percent increase in profits during the January-May period, compared with 4.1 percent for the first four months, the NBS said.
 
"Earnings picked up as macro policies to stabilize growth and corporations' efforts to counter impacts of trade tensions took effect," said Liu Chunsheng, an associate professor at the Beijing-based Central University of Finance and Economics.
 
Stimulus through tax and fee cuts came into play in May, Liu said, citing Ministry of Finance data showing that value-added tax revenue dropped by about 20 percent year-on-year in May.
 
Looking ahead, industrial profit may continue to be shored up by the nearly 2 trillion yuan worth of tax and fee cuts and register full-year growth of between 3 percent and 5 percent, said a report from the Shanghai-based Everbright Securities.
 
But analysts also cautioned that trade tensions may weigh on industrial profits, as related uncertainties remain and May's figures did not fully reflect impacts of the additional tariffs on $200 billion worth of Chinese goods that took effect in May.
 
The Chinese economy is developing in a healthy and resilient way, with the transformation from old growth engines to new ones accelerating, but deeply rooted problems remain and external instabilities are on the rise, according to a statement released on Thursday by the People's Bank of China, the central bank.
 
The PBOC vowed to keep a close eye on the changes in global and domestic economic and financial situations, and to take innovative and coordinated measures accordingly.
 
Source: Xinhua