Industrial profit growth stays steady

China’s major industrial companies enjoyed steady profit growth in the first seven months of this year, backed up by the country’s solid economic fundamentals and supply-side structural reforms, official statistics showed yesterday.

Profits at major industrial firms grew 17.1 percent year on year in the January-July period to total 3.9 trillion yuan (US$572 billion), 0.1 percentage points slower than the expansion for the January-June period, the National Bureau of Statistics said.

In July alone, combined profit of industrial companies with annual revenue of more than 20 million yuan each went up 16.2 percent year on year, dropping 3.8 percentage points from the gain in June.

“Industrial profit posted a slightly slower growth in July compared with June, which was mainly due to the weaker rise in the Producer Price Index and the expanding increase in the purchase price,” the bureau’s statistician He Ping explained.

He attributed the overall steady growth to the deepening of the country’s supply-side structural reforms, which led to falling production costs and lower leverage ratios.

“The supply-side structural reforms have shown to be effective,” He added.

The cost and expense per 100 yuan of revenue from the main business was down 0.38 yuan to 92.63 yuan in the January-July period from a year earlier, with the cost dropping 0.35 yuan to 84.45 yuan.

The leverage ratio also fell as the debt-to-asset ratio was down 0.5 percentage points to 56.6 percent at the end of July, the bureau said.

Breaking down the figures, He highlighted that the debt-to-asset ratio of state-owned enterprises slipped sharply by 1.3 percentage points from a year earlier to the lowest level since 2016.

SOEs made a combined profit of 1.19 trillion yuan in the first seven months, up 30.5 percent from the same period of last year. Collectively owned firms, joint-stock companies, overseas-funded enterprises and private firms saw profit growth of 4.1 percent, 21.3 percent, 7.5 percent and 10.3 percent, respectively.

The bureau’s report also pointed out that the overall efficiency of industrial enterprises continued to improve, with faster inventory turnover of products and stronger profitability.

Among the 41 major industries surveyed, 32 posted year-on-year profit growth during the first seven months.

Manufacturing, which accounted for 84.75 percent of the total industrial profit, saw the sector’s combined profit expand 14.3 percent. The mining industry’s profit surged 53.4 percent, and those of power generation, heating, fuel gas, water production and supply firms went up 17.8 percent.

Profit in the petroleum and natural gas extraction sector surged 450 percent in the January-July period while it jumped 97.8 percent in the ferrous metal smelting and rolling processing industry.

The non-metallic mineral products industry saw a 45.2 percent gain in profit, which grew 29.2 percent in the chemical raw material and product manufacturing sector. The electric and thermal power production and supply sector had a 19.6 percent gain.

Industrial firms’ lower leverage ratio is evidence of progress in China’s deleveraging efforts.

China carried out policy adjustments with stricter enforcement to accomplish the dual task of taming financial risks and promoting the sector to play a more significant role in bolstering the real economy.

China’s leverage ratio narrowed by 1.1 percentage points in the first quarter of the year from the same period of last year, while enterprises saw their debt gauge 2.4 percentage points lower and governments’ down 0.7 percentage points.

Policy-makers have vowed to keep the Chinese economy on a stable and healthy development track with proactive fiscal measures and prudent monetary policies in the second half.

Supply-side structural reforms should be pushed forward, according to a meeting of the Political Bureau of the Communist Party of China Central Committee in early August.

“Efforts should be made to keep employment, the financial sector, foreign trade, foreign and domestic investments and expectations stable,” read a statement released after the meeting.