Industrial companies’ gains remain steady

Workers on the production line of a hub manufacturer in Lianyungang, Jiangsu province. [Photo by Geng Yuhe/For China Daily]

Downstream profits hog limelight; Nov data show firm economic recovery

China’s major industrial companies maintained steady profit growth in November.

This indicates the downstream sector’s gains are improving, thus narrowing the wide gap with the profits of upstream industries, and showcases the country’s firm economic recovery, experts said on Monday.

According to the National Bureau of Statistics, profits at major industrial firms, those with annual revenue of at least 20 million yuan ($3.13 million), rose 9 percent year-on-year in November to 805.96 billion yuan, compared with the nearly 25 percent gain in October.

For the January-November period, profits surged 38 percent year-on-year to 7.98 trillion yuan, and the average January-November growth rate for 2020 and 2021 stood at almost 19 percent, the NBS said.

Zhu Hong, a senior NBS statistician, highlighted the improvement in the overall business profit structure in November, saying it is driven by government efforts to rein in rising raw material prices and ease the pressure exerted by high costs of downstream industries.

Zhu said profits of equipment and consumer goods manufacturers accounted for a larger part of total profits in November, which has helped narrow the gap.

According to Zhu, while the contribution of mining and raw material sectors to overall profit growth weakened as some bulk commodity prices fell, the contribution of consumer goods and equipment manufacturing strengthened in November.

NBS data showed consumer goods manufacturers posted profit growth of 13.6 percent in November, 10 percentage points higher than that in October. And equipment manufacturers posted a profit growth of 0.8 percent year-on-year, compared with the 7.5 percent decrease in October.

Among the 41 industries surveyed, 26 sectors saw a year-on-year increase in total profits in November, up from 23 sectors in October. And 22 sectors saw improvement in profits from the previous month, among which over 80 percent are from midstream and downstream industries, the NBS said.

Zhou Maohua, an analyst at China Everbright Bank, said profit differentiation between upstream and downstream industries improved in November amid a pickup in domestic demand, an easing in power crunches in some parts of the nation, the correction in raw material prices and government efforts to ease enterprises’ burdens.

Citing the government’s effective measures to alleviate enterprises’ difficulties like taxes and fee reduction and financing support, Zhu from the NBS said the private sector and the micro and small businesses saw improvement in their profits.

According to the NBS, profits of private enterprises jumped almost 13 percent year-on-year in November, and micro and small businesses’ profits soared nearly 16 percent in November.

Zhu warned of high cost pressures on enterprises, which could see the country increasing support for manufacturing firms, especially SMEs, to continuously stimulate the vitality of market players. Also, more efforts will be made to ensure stable supplies and prices, so as to maintain the stability of the industrial economy, Zhu said.

Zheng Lei, chief economist at Glory Sun Financial Group, said major industrial enterprises’ profit growth has been rising substantially faster than GDP growth, suggesting support from large industrial enterprises for macroeconomy remains strong.

“This is a key reason why GDP growth may reach about 8 percent this year,” Zheng said. “However, small and medium-sized industrial enterprises generally suffered from the COVID-19 impact, especially those in midstream and downstream industries.”

Zheng suggested the government should roll out more industrial, fiscal and monetary policies to help SMEs to accelerate sales, reduce inventories and expand production.

And large enterprises should also consider purchasing more products from SMEs in the upstream sectors, he said.

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