Industrial companies post lower profit growth

The country's industrial companies saw an easing of profit growth in the first quarter of this year, suggesting economic recovery in the world's second largest economy has uneven momentum.

In the first quarter, the profit of industrial companies with an annual revenue of 20 million yuan ($3.24 million) or more grew 12.1 percent from a year earlier to 1.17 trillion yuan, in contrast to the 17.2 percent gain in the first two months of this year, the National Bureau of Statistics commented on its website on Saturday.

March saw registered profits of 464.9 billion yuan, an increase of 5.3 percent from a year earlier, significantly slower than the first two months, the bureau said.

The whole of 2012 saw domestic industrial companies' profits edge up 5.3 percent year-on-year and profit growth start to resurge in December, gaining 17.3 percent year-on-year, after several tepid months.

"The March slowdown in Chinese industrial companies' profit growth is in accordance with China's faltering economic recovery, while the first quarter GDP growth did not maintain the pickup in the fourth quarter of last year," said Tang Jianwei, an economist at Bank of Communications in Shanghai.

Industrial companies' revenue in the first three months reached 22.2 trillion yuan, up 11.9 percent year-on-year, slower than the 13.1 percent gain in the first two months and the 14.1 percent growth in the same period in 2012, the bureau said. Meanwhile, profit margins in the first quarter were 5.3 percent, level with that in the first three months of 2012, according to the bureau.

Zuo Xiaolei, chief economist of Galaxy Securities, said that profit growth of industrial companies in the first quarter was "quite satisfactory".

"The government should focus on efficient investments in the future and must reduce inefficient investments, which may help inflate GDP growth but not help industrial overcapacity," she said.

The profits of State-owned industrial enterprises registered 341.2 billion yuan in the January-March period, increasing 7.6 percent year-on-year, while profits of private industrial companies rose 17.8 percent year-on-year to 375.7 billion yuan, the bureau said.

The world's second largest economy expanded 7.7 percent in the first quarter of 2013, trailing economists' expectations. It's economy has snapped out of a seven-quarter slowdown and began to pick up in the fourth quarter of 2012, gaining 7.9 percent year-on-year. Annual economic growth eased to 7.8 percent in 2012, the weakest pace since 1999.

China should continue with its steady macroeconomic policies while being more flexible with its microeconomic policies, the Standing Committee of the Political Bureau of the Communist Party of China Central Committee said in a meeting presided by President Xi Jinping on Thursday.

"The eased profit growth of industrial companies in March is due to the poor performance of nine industries - including coal mining, ferrous metal mining and oil and gas exploration - which together pulled down March profit growth by 12 percentage points from the pace in January and February," said Yu Jianxun at the industry department of NBS.

In the first three months, profits in coal mining dropped 40.3 percent year-on-year, while those in ferrous metal mining dropped 5.2 percent, and oil and gas exploration were down 4.5 percent in the same period, the bureau said. In contrast, the ferrous metal smelting and rolling industry saw a 3.3-fold profit increase in the January-March period, while net earnings in the electricity and heat production and supply industry jumped 90.5 percent.

"Sluggish demand at home and abroad and the rising costs of labor, environmental protection and resources were responsible for the slowdown in industrial companies' profit growth," Tang Jianwei said.