Industrial firms see decline in profits in Jan-Feb

Profits of China's industrial firms posted their biggest fall in the post-global financial crisis era in the first two months of this year, official data showed on Wednesday.

Analysts said this a reflection of the overall weakening economy, but profit growth of those firms may gradually pick up starting from the second quarter as the country's supportive policies take effect.

Profits registered by the country's industrial firms in the January-February period fell by 14.0 percent year-on-year to hit 708.01 billion yuan ($105.4 billion), the National Bureau of Statistics (NBS) said on Wednesday. It marked the biggest slump since May 2009.

The data combines figures for January and February to iron out possible distortions as a result of disrupted economic activities during the annual weeklong Lunar New Year holiday. The festival falls either in January or February.

After deducting the effect of the Lunar New Year holiday, which started from early February this year, the cumulative profit growth of industrial firms in the first two months was largely at the same level as that a year ago, said Zhu Hong, a senior official of the NBS.

The falling profit growth in some major industries, such as auto, oil processing, steel and chemicals, accounted for almost all of the profit growth slump of industrial firms, said Zhu.

The sharp decline in industrial profits reflected the weakening in growth of the world's second-largest economy, which expanded at 6.6 percent year-on-year in 2018. The government has taken a number of measures, such as injecting liquidity into the market to facilitate financing of manufacturing industries and small enterprises and increasing infrastructure investment, to boost growth.

"The profit growth of industrial firms in the first two months of this year is in line with the falling trend seen since late last year and it is a reflection of the downside economic growth pressure," said Hu Chi, a researcher at the research center of the State-owned Assets Supervision and Administration Commission.

The central government has vowed to cut taxes and fees and expand effective investment to keep the country's economic growth within 6 percent and 6.5 percent this year, according to the Government Work Report released at this year's session of the National People's Congress.

Central departments are implementing the policies put forward in the report, which will boost industrial production and economic growth, Hu told China Business News.

In the past, whenever China witnessed negative corporate profit growth, it accelerated infrastructure investment, loosened restrictive real estate policies and cut taxes to boost growth, said a China Merchants Securities research report. "We expect industrial profit growth to gradually pick up starting from April and become positive in the second quarter of this year."