Growth of industrial profits at 6-year high

Updated 2018-01-27 09:25:01 China Daily

China's industrial enterprises registered their highest profit growth in six years in 2017, due to overcapacity cuts and cost reduction efforts, and analysts said the trend of steady industrial profit growth may continue this year.

Profits surged by 21 percent year-on-year to hit 7.519 trillion yuan (.19 trillion), the fastest pace since 2011, when growth reached 25.4 percent, according to data released by the National Bureau of Statistics on Friday. In 2016, profit growth was 8.5 percent.

In December 2017, growth was 10.8 percent, compared with 14.9 percent in November.

Thirty-seven industries out of a total of 41 saw their profits increase year-on-year in 2017, said He Ping, a senior statistician of the NBS, in a statement. The mining industry's profits increased by 2.6 times, compared with a decline of 27.5 percent in 2016, He said. High-tech manufacturing registered a profit growth of 20.3 percent-higher than general manufacturing.

The strong growth of industrial profits last year was mainly due to cuts in overcapacity and cost reduction efforts as China pushed forward its supply-side structural reform, He said.

"Excessive production capacity reduction in the iron and steel and coal mining sectors had improved the quality of supply, raised prices of products and led to much higher corporate profit levels," said He.

The trend of steady industrial profit growth will carry into this year, analysts said.

"Profits this year won't look too bad, as producer prices are expected to rise modestly," said Zhang Yi, chief economist at Capital Securities in Beijing, according to Reuters. Zhang added that he expected industrial profits to grow by more than 10 percent this year.

"Modest price gains will give room for companies to deleverage," he added.

China's industrial enterprises will fare well this year, so long as China's infrastructure investment can remain stable, said Jiang Feitao, an economist of the Institute of Industrial Economics of the Chinese Academy of Social Sciences. Fixed-asset investment, especially infrastructure investment, has a major bearing on demand for raw materials and in turn influences corporate profits, he told National Business Daily.

China's fixed-asset investment grew by 7.2 percent in 2017, compared with 8.1 percent in 2016. Analysts generally predicted that it would remain at around 7 percent this year.

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