China's industrial firms see faster profit growth

While the industrial sector has enjoyed a year-long construction boom, a government-led battle to clean polluted air has forced steel makers in north-eastern China to curtail output although factories elsewhere may have ramped up production to gain m
While the industrial sector has enjoyed a year-long construction boom, a government-led battle to clean polluted air has forced steel makers in north-eastern China to curtail output although factories elsewhere may have ramped up production to gain market share.PHOTO: AGENCE FRANCE-PRESSE

BEIJING • Profits for China's industrial firms rose at the slowest pace in a year in December as Beijing's anti-smog curbs hit activity, but profits clocked their fastest annual rise in six years as cost cutting and a construction boom helped businesses in 2017.

For the full year, profits surged 21 per cent to 7.519 trillion yuan (S$1.5 trillion), the fastest pace since the 25.4 per cent expansion in 2011, and accelerating from 2016's 8.5 per cent increase, data from the National Bureau of Statistics (NBS) showed yesterday.

The fast growth in 2017 profits is largely due to the deepening of cuts in over-capacity and costs reduction efforts, Dr He Ping of the statistics bureau said in a statement along with the data release.

While China's efforts to reduce pollution and credit risks in the economy have hit segments of industry, analysts expect businesses will manage a transition to new requirements for cleaner production and leaner operations without taking major blows to their profits.

Profits in December rose 10.8 per cent from a year ago to 824.16 billion yuan, their weakest expansion in 12 months, and slowing from November's 14.9 per cent gain. China's producer prices rose at their slowest pace in 13 months in December, as the government's war against winter smog dented factory demand for raw materials.

While the industrial sector has enjoyed a year-long construction boom, a government-led battle to clean polluted air has forced steel makers in north-eastern China to curtail output although factories elsewhere may have ramped up production to gain market share.

  • 21%

  • Increase in profits for China's industrial firms for the full year, the fastest pace since 2011.

China's Ministry of Environmental Protection published a notice this month, saying it would impose "special emissions restrictions" on enterprises in major industrial sectors in northern parts later this year.

Despite some traders replenishing steel stockpiles ahead of the Lunar New Year holiday, appetite has diminished due to concerns about demand.

China's one-week Lunar New Year holiday starts from Feb 15.

Chinese steel prices fell yesterday, as demand was tepid in winter months, weighing down raw materials.

Gains for the year were concentrated in the upstream industries like coal and steel production while downstream companies, such as manufacturers, were able to offset higher input costs by keeping their labour costs stable, analysts say.

Profits at China's state-owned industrial firms rose 45.1 per cent in 2017 from the year before, slowing from a 46.2 per cent increase in January-November.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 27, 2018, with the headline 'China's industrial firms see faster profit growth'. Print Edition | Subscribe