China manufacturing continues sustained recovery as industrial profits grow for eighth straight month

Profits at China’s industrial firms surged 20.1 per cent year on year in December to 707.11 billion yuan (US$109.3 billion)
For 2020, annual profits for China’s industrial firms grew 4.1 per cent year on year to 6.45 trillion yuan (US$1 billion), recovering from a 3.3 per cent decline seen in 2019

China economy

Reuters

Published: 10:17am, 27 Jan 2021

Why you can trust SCMP

Profits at China’s industrial firms grew for the eighth straight month in December, suggesting a sustained recovery as the manufacturing sector rapidly emerged from its coronavirus slump.

Profits surged 20.1 per cent year on year in December to 707.11 billion yuan (US$109.3 billion), after rising 15.5 per cent in November, National Bureau of Statistics (NBS) data showed on Wednesday.

China is the only major economy in the world to avoid a contraction in 2020, with gross domestic product up 2.3 per cent for the full year, while many countries remain crippled by the pandemic.

Economists polled by Reuters expect China’s GDP to rise 8.4 per cent in 2021, the fastest pace in a decade. However, some analysts cautioned that a slower recovery in consumption and a potential rapid slowdown in credit growth could be risks for the Asian powerhouse.

China’s factory gate prices fell last month at their slowest pace since February, pointing to improving corporate profitability.

For the full year of 2020, annual profits for China’s industrial firms grew 4.1 per cent year on year to 6.45 trillion yuan (US$1 billion), recovering from a 3.3 per cent decline seen in 2019. It was also quicker than a 2.4 per cent gain seen in January-November.

The profit gains last year were notably driven by the manufacturing sector, which saw margins increase by 7.6 per cent, said Zhu Hong, a senior statistician at the statistics bureau.

China’s exports were surprisingly strong last year as factories raced to fill overseas orders amid a raging pandemic.

China economy: latest data about world’s second largest economy

Liabilities at industrial firms rose 6.1 per cent year on year at the end of December, versus 6.8 per cent growth as of the end of November and a 5.4 per cent uptick as of end-2019.

Earnings at China’s state-owned industrial firms were down 2.9 per cent for 2020 year on year, compared with a 4.9 per cent decline from January-November and a 12 per cent slump in 2019, the statistics bureau data showed.

Private-sector profits grew 3.1 per cent in 2020, improving on both January-November’s 1.8 per cent growth and 2019’s 2.2 per cent rise.

The industrial-profit data covers large firms with annual revenue of more than 20 million yuan from their main operations.

The impact will be controlled to a certain extent, because we have had rich experience from combating the pandemic in Hubei. And now we are running targeted control, which will not result in a large-scale shutdown of production

Huang Libin

On Tuesday, Ministry of Industry and Information Technology spokesman Huang Libin played down concerns that sporadic coronavirus outbreaks over the last few weeks will have a significant impact on the industrial sector.

“Recently the outbreaks have resurged in many places, in particular, the situation in Hebei and northeast China is serious. This will have a certain impact on the industrial sector, but the impact is much smaller compared with the outbreak in Hubei early last year,” said Libin, who is also director general of the Performance Inspection and Coordination Bureau.

“The impact will be controlled to a certain extent, because we have had rich experience from combating the pandemic in Hubei. And now we are running targeted control, which will not result in a large-scale shutdown of production.

“As for the policy of encouraging people to skip returning home for the Chinese New Year holiday, it is likely to be a positive boost for the industry sector.”

Additional reporting by Orange Wang

Post