BEIJING – The profits of Chinese industrial firms grew in March and rose from a four-month contraction, adding optimism that the world's second largest economy could begin to stabilize.
PHOTO: PHOTO: Employees work on the production line of Lithium-Ion batteries in a factory in Dongguan, Guangdong province, China, October 16, 2018. The image was taken on October 16, 2018. REJTORS / Joyce Zhou / File Photo
Returning to profits could contribute to the debate about the more the need for Beijing to be pumped into the economy, if it is a repair.
Beijing and Washington appear to be moving toward a trade deal, but investors are worried that a sharp recovery in China will have consequences for the wider global economy.
Profit in March rose 13.9 percent year-on-year to 589.52 billion yuan (87.62 billion dollars), the National Bureau of Statistics (NBS) said on its website Saturday, recovering from a fall from 14 percent in the first two months.
That marked the biggest monthly increase since July 2018.
For the first quarter of the year, profits occupied by industrial companies fell 3.3 percent to 1.3 trillion yuan compared to the previous year, according to the NBS.
Growth in March is mainly driven by acceleration of production and sales, as well as recovery of profits in key industrial sectors, the Zu Hong statistical office said in a statement.
The rise in industrial profits diminished concerns about the slowdown in the Chinese economy, as it was in the past year, exaggerated by a fierce trade dispute with the United States, as well as a campaign to prevent debt risk that led to higher costs for financing companies.
The government has increased stimulus measures this year, announcing billions of dollars in additional tax cuts and infrastructure spending. Industrial production growth in China rose the fastest pace since July 2014 in March, while gross domestic product grew by 6.4 per cent, beating expectations.
Manufacturer prices, meanwhile, also rose for the first time in nine months in March, abolished by higher prices of global commodity prices and government efforts to boost domestic demand.
However, there is still concern about whether the upturns will be viable, because profits could be due to seasonal factors – such as the continuation of constructions after the lunar New Year – rather than returning to wider demand.
The bulk of the largest steel producers in China recorded lower earnings in the first quarter due to higher raw material prices and weak demand.
The country's largest steel production company, Baoshan Iron & Steel Co. Ltd, announced its first negative growth from 2015 on Wednesday. Jiangsu Shagang Co. Ltd, China's largest privately owned steel plant, also fell 60.62 percent in its net profit in Q1.
Upstream sectors, such as mining and metal producers and state-owned firms, still dominated most of the profit gains. Profits for extraction of oil and natural gas grew by 10.3% in the first, versus the fall of 5.7% in January-February.
However, profits in Chinese state-owned industrial companies, however, declined by 13.4 percent on an annual basis for the first quarter, according to the statistical office.
The liabilities of industrial enterprises increased by 6.5 percent for the period of one year since the end of March, the NBS reported.
The data include companies with annual revenues of more than 20 million yuan from their main operations.
Report by Min Zhang and Se Young Lee