China's industrial profits
soared 137 percent year on year during the January-March period to about
1.83 trillion yuan ($281.3 billion), as demand for raw materials surged
along with the continued economic recovery, data from the National
Bureau of Statistics (NBS) showed on Tuesday.
In March, profits of China's
major industrial firms rose to 711.18 billion yuan with an increase of
92.3 percent from the same period a year earlier, when the economy was
hit hard by the COVID-19 epidemic.
Major industrial firms in the
country refer to those that have an annual business turnover of at least
20 million yuan from their main operations.
However, the pace of growth
slowed from the first two months of this year, when industrial profits
saw an expansion of 179 percent compared with the same period in 2020.
The sharp growth of industrial
profits in the first quarter was mainly driven by skyrocketing profits
generated in raw material manufacturing sector, according to Zhu Hong, a
senior statistician from the NBS.
As prices for bulk commodities
climbed and demand picked up, margins in raw material manufacturing
industry saw a year-on-year growth rate of 434 percent, contributing to
51.5 percentage points of the overall industrial profit growth in the
first quarter.
"The industrial profits in the
first quarter exceeded the pre-COVID level by a large margin, mainly
driven by rising global demand for goods manufactured in China," Wang
Dan, chief economist of Hang Seng Bank China, told CGTN.
Wang expected such high external
demand to last till at least the third quarter with the rollout of major
stimulus packages in the U.S. and EU. She said the resurgence of
COVID-19 in India will give rise to more production capacities to shift
to China, including fabric and auto parts.
"Post-COVID profits and
production are increasingly concentrated in leading companies of
industries, which had pushed up growth in above-scale profits," Wang
said.
Among the 41 industrial sectors
under the NBS measurement, 39 sectors saw at least double-digit growth
in terms of profits for the first three months, and 16 sectors
encountered a 100-percent uptrend in profits.
Rising costs for enterprises
Because of the low-base effect
of 2020, it is more accurate to compare monthly performance by looking
at the two-year annualized growth, according to Wang.
The growth of industrial profits
in the first quarter was 50.2 percent compared with the same period in
2019, while the data for the first two month was 72.1 percent.
"In March, the two-year
annualized growth rate of industrial profit slowed from the previous two
months due to erosion from the rising commodity prices," Wang said.
She noted that the rising cost
was mostly undertaken by lower and mid-stream producers, but less on
upstream suppliers.
"As such, computer and car
makers saw the largest deceleration in March in their profit growth [by
two-year annualized figure]. Profits for textile and furniture
industries had even contracted. In contrast, profits for metal
processors were only slighted affected," Wang added.
She expected commodity inflation
to last until the third quarter and the ensuing price will likely to be
slow, as global recovery picks up pace.
The impact of worldwide monetary
easing has started to show in prices, which will further drag down
industrial profits, according to Wang.
A stronger dollar in the first
quarter had also put downward pressure on profits, especially in the
textile industry, as producers that were locked in contracts were
assuming a stronger yuan, Wang said. "In 2021, currency hedging will be
a key issue for exporters with rising uncertainties in the foreign
exchange market."
Zhu also cautioned that the
rising prices for raw materials are increasing the costs of enterprises,
and the foundation for the recovery of industrial profits still needs to
be further consolidated. "There are still great uncertainties in the
global pandemic trend and the international environment," he said.
The country's gross domestic
product expanded at a record pace of 18.3 percent year on year during
the first quarter of this year, driven by robust exports and a steady
pickup in domestic consumption.
Source: CGTN |