The profits of China's major industrial firms grew for a third
straight month in July, suggesting that the country's economy is
gradually gaining momentum with the help of effective government
measures to control the COVID-19 outbreak and resume production. Analysts said the acceleration in profits in July was mainly due to
government measures to boost resumption of work and production across
the whole industrial chain at a faster pace, as well as a rebound in
production and sales. They expected the rising demand will continue to
boost industrial profit growth in the next few months. The National Bureau of Statistics said on Thursday that profits at
China's major industrial firms rose 19.6 percent year-on-year to 589.51
billion yuan ($85.71 billion) in July, improving from 11.5 percent
growth in June. Total industrial profits in the first seven months of this year fell
8.1 percent year-on-year to 3.1 trillion yuan, but easing from a 12.8
percent dive in the first half, NBS data showed. Profit growth in August was aided by significant recoveries in key
sectors, including equipment and high-tech manufacturing as well as
higher returns in business investment, said Zhu Hong, a senior NBS
statistician. In July, profits in the equipment manufacturing sector jumped by 44.3
percent from a year earlier, with automotive manufacturing seeing a
profit growth rate of 125.5 percent, according to Zhu. "The continuous recovery of industrial profits in July was mainly
affected by the rebound in global commodity prices, the narrowing
decline in industrial product prices and the government's proactive
fiscal policies and active moves to lower costs for enterprises," said
Wu Chaoming, deputy dean of the Chasing Institute of Chasing Securities. NBS data showed 32 out of 41 surveyed industries recorded growth in
profits in July, nine more than in June. High-tech manufacturing
recorded 36.5 percent growth in profits in July, 27.5 percentage points
higher than in June. Wu said the high-tech manufacturing profit growth was fueled by the
government's strong financial support, rising demand for new
infrastructure during the year and residents' growing need for
consumption upgrading. "I expect profits in high-tech manufacturing to keep rising in the
future, with an accelerated pace in the replacement of old growth
drivers with new ones. "While the rebound in production and sales and the lower costs will
help boost profit growth, those factors will also be affected by the
slow pace of recovery in consumption," Wu added. "Mounting global uncertainties may lead to increased capital market
volatility, which will then affect business investment. I expect
industrial profits will record positive but slower growth in the coming
months." Business activity in China is significantly improving after a steep
slump amid the coronavirus outbreak earlier this year, as the country
has made considerable progress in containing the pandemic. Liu Chunsheng, an associate professor at the Beijing-based Central
University of Finance and Economics, spoke highly of the Chinese
government's effective measures to fight the pandemic, saying that these
paved the way for the gradual and steady recovery in the economy. Citing JP Morgan's recent decision to boost its 2020 China growth
forecast to 2.5 percent from 1.3 percent in April, he said China could
be the only major economy to see growth this year. "The recovery in the Chinese economy will definitely give a strong boost to industrial profit growth," Liu said. "Currently, China is building a new model of development in which
domestic economic networks play the primary role, and domestic and
international economic networks complement each other. That will also
boost demand and help increase profits." Liu called for increased fiscal and monetary support for consumption
and infrastructure investment, saying the government also needs to make a
big push to encourage the smooth flow of production factors, build a
unified domestic market, create a more business-friendly market, further
reduce taxes and fees for enterprises, and deepen reforms and
opening-up. Zhou Maohua, an analyst at China Everbright Bank's financial market
department, expected to see a continuous improvement in industrial
profits. "The government's strong support for the real economy and the rising
demand from both home and abroad will help boost the profit growth,"
Zhou said.
|