Leading industrial companies report a 25% increase in profits

China’s leading industrial companies reported a 25.1 percent jump in profits in October from a year earlier, fueled by cost-cutting and improved efficiency at state-owned enterprises.

SOEs dramatically outstripped the private sector, with profits surging almost 50 percent for the first 10 months compared to a little over 14 percent for private companies, the National Bureau of Statistics said yesterday.

The major industrial companies notched up profits totaling 745.41 billion yuan (US$112.94 billion) last month. It was the third-highest monthly growth this year, although slightly down on September’s 27.7 percent.

For the first 10 months, profits rose 23.3 percent year on year to 6.25 trillion yuan.

The bureau tracks companies with an annual revenue of more than 20 million yuan. Of the 41 industries surveyed, 38 posted year-on-year profit growth during the first 10 months.

Bureau statistician He Ping said companies were improving efficiency and costs were falling. 

The number of companies losing money also fell. For each 100 yuan of revenue, companies are spending 85.46 yuan, a 0.26-yuan decrease from the same period of last year, the bureau said.

The leverage ratio is also falling. By the end of October, the average debt-asset ratio had dropped 0.5 percentage points to 55.7 percent from a year ago.

Profits increased in the coal, steel, chemicals and petroleum sectors, while profit growth in advanced manufacturing and strategic new industries was above average.

Profits at state-owned enterprises rose 48.7 percent to 1.4 trillion yuan between January and October, compared to a 47.6 percent rise in the first nine months.

Private companies reported an annual profit growth of 14.2 percent to 2.03 trillion yuan in the first 10 months, compared to 14.5 percent year on year in the first nine months.

The industrial sector, which accounts for about a third of China’s GDP, started to pick up last year after a poor 2015, helped by government efforts to cut over-capacity and a recovery in the property sector.

The Producer Price Index, which measures the price of goods at the factory gate, rose 6.9 percent year on year in October.

Meanwhile, China’s manufacturing sector stayed above the boom-bust mark for the 11th month in a row in October with the Purchasing Managers’ Index at 51.6. 

A reading above 50 indicates expansion, while a reading below 50 signals contraction.

In a research note yesterday, China Merchants Securities Co said stable growth in profits at industrial companies confirmed that economic growth and corporate profitability remained steady in the face of headwinds.

It said supply-side reforms, a recovery in exports and supportive government policies will sustain profit growth — expected at 10-15 percent next calendar year.