Better demand, lower costs help fuel recovery in manufacturing sector, says NBS

Profits at China's major industrial firms grew at a steady pace in the first four months of the year as the country's economic recovery gained further momentum, official data showed on Thursday.

China's industrial firms with annual business revenue of at least 20 million yuan ($3.12 million) saw their combined profits rise 106 percent on a yearly basis during the January to April period to 2.59 trillion yuan, according to the National Bureau of Statistics.

The figures represented an annual growth of 49.6 percent when compared with 2019, with average growth rate in the past two years coming in at 22.3 percent. On a monthly basis, industrial profits rose by 57 percent in April to 768.63 billion yuan.

Industrial profits for the manufacturing sector grew by 114 percent on a yearly basis to 2.2 trillion yuan. Overall, industrial profits rose steadily due to the improved demand and lower costs, the NBS said.

According to Zhu Hong, a senior statistician at the NBS, profit growth remained steady in most of the sectors on a yearly basis, thereby sustaining the upward growth momentum that began since the second half of last year.

Profits in the mining sector reached 217.1 billion yuan, up 103 percent on a yearly basis. Higher prices for bulk commodities and improved demand fueled the profit surge in the mining sector, said Zhu.

Equipment manufacturing and high-tech manufacturing also saw improved momentum, while consumer goods manufacturing continued its steady recovery, the NBS said.

Zhu said that overall, the performance of industrial enterprises remained stable and showed quick recovery during the four-month period. This is noteworthy, considering that the global COVID-19 situation is still complex, the foundation for industrial economic recovery is not yet solid and the profit growth has been uneven. Some of the consumer industries are yet to return to the pre-pandemic profit growth levels.

Zhu said that the higher bulk commodity prices increased pressure on the production and operation of midstream and downstream industries. It is important to ensure steady bulk commodity supplies and keep the prices stable to consolidate the growth recovery.

Zhu Jing, a senior analyst at the research department of Bank of China, said profits of industrial firms will grow at a much faster pace on the back of steady domestic demand, resilient external demand and the country's existing pro-employment policies. However, operating costs may increase for most of these enterprises and measures need to be rolled out to monitor the market changes and increase supply and demand of certain products.

Zhou Lanxu contributed to this story.