Accelerated industrial profit growth evidence of economic stabilization

BEIJING - China's major industrial firms saw stronger profit growth in the first two months of this year thanks to improved efficiency and profitability, adding to evidence of a stabilizing economy.

Industrial companies with annual revenue of more than 20 million yuan (about $3.2 million) reported profits of 969 billion yuan in the first two months, a 16.1-percent increase from a year earlier, the National Bureau of Statistics (NBS) said Tuesday in a statement.

The reading was 5.3 percentage points higher than the growth registered in December, according to the NBS.

Among the 41 industries surveyed, 29 posted year-on-year profit growth during Jan- Feb period.

Industries like pharmaceuticals, coal mining and textiles all reported faster growth during the two-month period, said the NBS.

NBS statistician He Ping attributed the profit growth to improved profitability and reduced costs.

"While industrial profits maintained rapid growth, improvements were made in efficiency and profitability," He said.

In the first two months, costs per 100 yuan of revenue dropped 0.33 yuan from the same period last year, according to He.

Meanwhile, the profit rate of major industrial companies rose by 0.33 percentage points to 6.1 percent.

He mentioned that the leverage ratio in Chinese industrial enterprises also fell. By the end of February, their debt-asset ratio dropped 0.8 percentage points from a year ago to 56.3 percent.

The companies also reported healthier balance sheets. The average collection period for accounts receivable decreased from 47.6 days a year earlier to 47.4 days by the end of February.

He highlighted the performance of major state-owned industrial companies whose profits rose 29.6 percent in the first two months.

Industrial output, which accounts for about one-third of China's GDP, expanded at 7.2 percent year on year in the first two months, accelerating from 6.2 percent growth in December 2017.

Tuesday's data is the latest economic indicator to show China's economy stabilizing and improving.

Beijing-based investment bank CICC predicted a "good start" for the economy this year in a research note, citing continued industrial strength and a pick-up in demand growth.

China expects economic expansion to be around 6.5 percent this year, unchanged from 2017.