Profits of China’s major industrial enterprises maintain steady growth in August

The profits made by China’s industrial enterprises above the designated size increased by 19.1 percent year on year in August, sustaining the momentum of steady growth, according to data released by the country’s National Bureau of Statistics (NBS) on Sept. 27.

In the first eight months of 2020, the total industrial profits went down by 4.4 percent year on year, and the decrease narrowed 3.7 percentage points from that in the January-July period.

The growth is a mirror of China’s effective results in completing tasks to keep employment, the financial sector, foreign trade, foreign and domestic investments, and expectations stable and ensure security in job, basic living needs, operations of market entities, food and energy security, stable industrial and supply chains, and the normal functioning of primary-level governments as the country has secured major achievements in epidemic prevention and control.

The increase in industrial profits in August was driven by the stable recovery of production and demand, said Zhu Hong, senior statistician of the NBS.

The total value added of the industrial enterprises above the designated size went up 5.6 percent year on year in August, accelerating from a rise of 4.8 percent registered in July.

Last month, the decline in China’s total fixed-asset investment further narrowed, basically returning to the level of the same period last year. The country saw the first positive growth of total retail sales of consumer goods since this year in August.

The gradual improvement in production and demand has boosted the sales growth of industrial enterprises, Zhu analyzed.

In August, China’s producer price index continued to rise and the operating income of industrial enterprises grew by 4.9 percent year on year, 1.6 percentage points higher than that in July, Zhu said, adding that expansion of enterprises’ production scale strongly supported the steady growth of their profits.

The growth of industrial profits was attributable to a continuous decline in unit costs and better profitability of enterprises, according to Zhu.

As the implementation of supportive policies become more and more effective, in August, industrial enterprises above the designated size reduced their costs by 0.47 yuan per 100 yuan ($14.67) of their operating income year on year and increased their profit rate by 0.8 percentage points from a year ago, a year-on-year increase for four months in a row.

Zhu also attributed the increase in industrial profits to a significant recovery in mining profits and accelerated growth in raw material manufacturing profits, thanks to improving demand as well as increasing prices of global bulk commodities including crude oil and iron ore.

In August, the circle between supply and demand in the industrial sector improved, and the continuous recovery of downstream industries further drove the development of upstream industries.

Raw material manufacturing profits grew by 32.5 percent, 17.8 percentage points higher than that in July, contributing to an increase of 6.7 percentage points in the profits of industrial enterprises above the designated size.

Besides, Zhu said the increase in industrial profits was the result of relatively fast growth in the profits of the equipment manufacturing sector.

In August, the profits of the equipment manufacturing sector rose by 23.1 percent year on year, driving an increase of 8.1 percentage points in the total profits of China’s industrial enterprises above the designated size.

In particular, the profits of the general equipment manufacturing industry increased by 37 percent year on year, and those for the electrical machinery and equipment manufacturing industry grew by 13.3 percent, up 11 and 5.2 percentage points from July, respectively.

According to Zhu, the growth of industrial profits was also driven by a decline in losses of enterprises month by month. Thanks to further improvement in the operational situation for enterprises, the number of loss-making enterprises continued to decrease and their losses also fell sharply.

In August, the losses of loss-generating enterprises dropped drastically by 37 percent year on year. At the end of August, the losses of loss-making enterprises above the designated size narrowed by 1.2 percentage points compared with that at the end of July, sustaining the shrinking momentum month by month.

Zhu believes that China should continue to pursue supply-side structural reform as the main task, further tap into the potential of domestic demand, stimulate the vitality of market entities, ensure that market supply meets demand, and continuously consolidate the outcomes of economic recovery, so as to promote a steady improvement in the quality of industrial economic development.