Profits of China’s industrial firms rose 8.5% year-on-year in the first quarter, the National Bureau of Statistics (NBS) said, suggesting a steady start for the industrial economy this year. Upstream companies made increased profits from rising energy and raw material prices, while some midstream and downstream firms still face mounting pressure and difficulties. In the January-March period, industrial firms’ bottom line growth rate was 3.8 percentage points lower than that in the fourth quarter of 2021, the NBS said. Industrial firms’ profits reached CNY1.96 trillion in the first three months, and the pace of profit growth quickened from a 5.0% gain reported in the first two months. Zhu Hong, Senior NBS Statistician, attributed the growth to effective government measures to cut taxes and fees and ease pressure on enterprises during the period.
During the January-March period, profits of mining firms grew 1.48 times. Profits in manufacturing fell 2.1% in the first quarter and bottom lines reported by power, heat, gas, water and supply firms slumped 30.3%. Zhu warned that industrial firms are facing multiple challenges from resurgent domestic Covid-19 cases and intensifying imported inflationary pressure, adding that more efforts should be made to ensure stable prices and supplies as well as smoother logistics services.
Zhou Maohua, Analyst at China Everbright Bank, attributed the large profits registered by upstream firms to expanding global demand and soaring energy and raw material prices, saying the slowdown in profits of some midstream and downstream firms is a combined result of a high-base effect from the previous year and rising commodity prices. China is capable of maintaining steady growth for the whole year with the help of solid government measures to control the pandemic and support hard-hit enterprises, Zhou said. A number of banks lowered their deposit rates and interest rates of large-denomination certificates of deposit recently. Reductions in the cost of deposits will lead to a decline in lending rates, thus lowering financing costs for the real economy, according to a report by CSC Financial Co.
