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Thursday, April 27, 2017, 12:56

China industrial profits maintain double-digit growth in March

By Agencies
China industrial profits maintain double-digit growth in March
This photo shows a construction site in Baoding, in China's Hebei province, on April 25, 2017. (Fred Dufour / AFP)

BEIJING - China's major industrial firms continued to post double-digit growth in March, adding to signs of a stabilizing Chinese economy, official data showed Thursday.

READ MORE: China crude steel output up 4.6 pct in Q1

The companies reported a 23.8-percent year-on-year profit growth last month, down from 31.5 percent in January and February but much faster than the 8.5-percent increase in 2016, according to the National Bureau of Statistics.

The buoy is aided by a continued construction boom, though the pace of growth eased from multi-year highs seen in previous months.

In the first quarter, industrial profits climbed 28.3 percent to 1.7 trillion yuan, slowing from growth of 31.5 percent in the first two months but still robust enough to suggest a further recovery in fixed asset investment in China in coming months.

Higher government infrastructure spending and a frenzied housing market have helped spur sales and prices of building materials, reviving profits for the country's long-ailing "smokestack" industries such as steel mills and smelters and giving them stronger cash flow to reduce a mountain of debt.

But firms further down the supply chain are seeing pressure on profit margins as they struggle to pass on higher input costs to consumers amid stiff competition.

"Purchasing prices are rising too quickly which is increasing pressure on companies that are trying to cut raw material costs," NBS official He Ping said in a statement accompanying the data, adding that financial costs for businesses are also rising.

Indeed, profits of equipment manufacturers rose 6 percentage points from the pace in Jan-Feb, while profits for makers of consumer products were up just 0.5 percentage points.

Profits for miners and producers of other raw materials fell 0.9 and 9.5 percentage points, respectively, likely reflecting a recent tumble in China's highly speculative commodities futures markets.

Shares of material companies have recoiled from their highest level since the 2015 market crash, while infrastructure stocks have pulled back from multi-month highs, though both are still up solidly so far this year.

All 13 steel companies that published first-quarter results as of April 19 reported net profits had more than doubled, the China Securities Journal said last week, with Nanjing Iron and Steel posting a surge of 4,830 percent.

China's largest oil and gas producer, PetroChina , said earlier this month that it expected a first-quarter profit of 5-6 billion yuan, down slightly from the preceding quarter, but a turnaround from a huge loss a year earlier.

Strong first-quarter profits, together with an increase of 14.1 percent in fiscal revenue, have set "an excellent foundation" for improved growth quality in 2017, Ning Jizhe, vice chairman at the National Development and Reform Commission (NDRC), told the People's Daily in an interview on Wednesday.

China's government has lowered its economic growth target to around 6.5 percent this year from a range of 6.5-7 percent last year and an actual rate of 6.7 percent.

First-quarter growth came in at a faster-than-expected 6.9 percent.

Earlier this month, the International Monetary Fund raised its 2017 growth projection for the Chinese economy to 6.6 percent from 6.5 percent.

Industrial firms' liabilities rose 6.6 percent from a year earlier as of end-March, unchanged from the pace seen in the first two months of 2017.

The profit data covers large enterprises with annual revenues of more than 20 million yuan from their main operations.

Data on Wednesday showed profits at China's state-owned firms rose 37.3 percent in the first three months of 2017 from a year earlier.

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