Year-on-year growth in profits of industrial enterprises above designated size expanded 2.7 percentage points in May from April, with single-month growth rate picking up for the first time since this year thanks to consumer goods manufacturing and equipment manufacturing industries. In addition, debt-to-asset ratio of industrial enterprises above designated size, particularly enterprises of manufacturing industry, keeps declining, indicating that industrial economy is still developing aggressively and steadily.
However, along with growth in producer price index (PPI) slowing down, accumulative increase in profits of industrial enterprises dropped for three consecutive months. Analysts believed that the growth in profits of industrial enterprises will move slower due to decline in PPI, but will maintain at double digit on the whole. Industrial economic growth is still potential.
Profits of automobile, electric power, and tobacco industries turn better
According to the National Bureau of Statistics (NBS), profits of industrial enterprises above designated size grew by 16.7 percent in May from a year earlier, with growth rate 2.7 percentage points higher than that in April. It is the first time that the growth rate picks up in single month since this year.
Dr. He Ping from the NBS interpreted that under the situation that industrial output increased stably and growth in price of industrial products slowed down, profit growth of industrial enterprises in May was faster than that in April. This is mainly because product sales, return on investment and non-operating revenues climbed faster and base number of profits at the same period of last year is low.
In terms of absolute quantity, automobile, electric power and tobacco industries made larger contribution to the profit growth of industrial enterprises, driving the profit growth up by 3 percentage points.
Statistics show that profits of automobile, electric power and tobacco industries turn better. Profits of automakers saw a year-on-year increase of 4 percent in May, which dropped by 6.7 percent in the previous month. Profits of production and supply of electric power industry fell by 31.8 percent year on year, which was 10.2 percent lower than that in April. Profits of tobacco industry rose by 82.4 percent from a year earlier, while it declined by 18.4 percent in April.
Yet profits of ferrous metal metallurgy, nonferrous metallurgy, chemical fiber, metal products and petroleum refining industries got much worsened.
Profits of industrial enterprises may keep double-digit growth in H2
Although the growth recovered in May, the accumulative growth plummeted for three consecutive months. The NBS’s statistics revealed that profits of industrial enterprises above designated size gained by 22.7 percent year on year during January and May, 1.7 percentage points slower than that in January-April period.
Profit growth of industrial enterprises is closely connected with the growth of PPI, which will drop along with the latter, Zhu Jianfang, chief economist with Citic Securities, said to the reporter of Shanghai Securities News in an interview.
Zhu analyzed that production capacity of China’s industrial product market is almost in balance at present. With global economy recovering, prices of industrial products will continue to pick up instead of dropping in the future. Profits of industrial enterprises are expected to expand by about 12 percent in the second half of the year.
Macro-research team of Huatai Securities viewed that profits of industrial enterprises will move down along with decline in PPI but at a slow and orderly pace. Influenced by cutting down capacity of heavy industry, industrial economy is still potential.
Noticeably, debt-to-asset ratio of industrial enterprises keeps descending as deleveraging continues to take effect. At the end of last month, debt-to-asset ratio of industrial enterprises above designated size registered 56.1 percent, down by 0.7 percentage point year on year. Breaking down the number, debt-to-asset ratio of manufacturing enterprises dived by 0.1 percentage point to 54.6 percent, while that of mining industry and public utility kept flat.
However, debt-to-asset ratio of state-owned enterprises moved up slightly by 0.1 percentage point to 61.3 percent, while that of private enterprises fell by 0.2 percentage point to 51.9 percent.
The good momentum of industrial profits proves again that China’s economy is under stable operation on the whole. The NBS will announce data about GDP for the second quarter at mid-July, which is predicted to go up slowly to 6.7-6.8 percent. The economy will continue to operate stably with good momentum for growth in the second quarter.
Translated by Vanessa Chen
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