Profit growth at China’s major industrial firms hit an eight-month high in March, backing expectations the world’s second-largest economy is set to stabilize as the government policies to bolster growth start to take effect, said industry analysts.
Industrial profits rose 13.9 percent year-on-year to 589.5 billion yuan ($87.6 billion) in March, data from the National Bureau of Statistics showed.
That compared with a 14 percent year-on-year fall in the first two months, the fastest pace since August 2018.
For the first quarter, major industrial firms’ profit fell by 3.3 percent year-on-year to 1,297.2 billion yuan.
Zhu Hong, senior statistician from the industry department of the National Bureau of Statistics, noted the growth in March came as the production and sales of these firms picked up in March, with the value-added industrial output expanding by 8.5 percent year-on-year, 3.2 percentage points higher than that in the first two months.
The reduction in value-added tax, expanding investment income and other factors also backed the growth, Zhu added.
A recent report from Ping An Securities noted the recovery in key industries contributed to the growth in March, and the industrial profit growth may continue to rise to 5 percent in January-April period.
“The value-added tax cut, which went into effect on April 1, will give a sudden boost to the profit growth of industrial enterprises,” the report said.
Guo Lei, chief macroeconomics analyst of GF Securities, agreed, saying the profit growth of major industrial firms will continue to rise in the second quarter this year.
“The average factory price of industrial products in the second quarter may be higher than that in the first quarter,” Guo added.
China’s producer price index, a gauge of industrial profitability, grew 0.4 percent year-on-year in March, according to the NBS. That pace picked up from the 0.1 percent flat growth in February.
Factory prices of production materials and consumer goods surged in March, up 0.3 percent and 0.5 percent year-on-year respectively.
Guo estimated the PPI will continue to grow in April and may be higher than that in March.
China’s economy, despite headwinds, enjoyed a good start in the first quarter, expanding at a faster-than-expected 6.4 percent year-on-year.
Yuan Da, spokesperson with the National Development and Reform Commission, said at a recent news conference in Beijing that the first quarter’s stable economic development has laid a solid foundation, and the government is confident to achieve the annual projected growth goal.
Last month, China set its GDP growth target for this year at a range of 6 to 6.5 percent, according to the 2019 Government Work Report.
