China's economic recovery hit as profit growth wanes
Mainland industrial firms post weaker earnings growth because of overcapacity and waning demand, but consumer retail sales stay firm
Growth in Chinese industrial firms' profits slowed last month, adding to evidence the mainland's economic recovery is losing steam.
Net income rose 5.3 per cent to 464.9 billion yuan (HK$580 billion) from last March, down from a 17.2 per cent pace in the first two months of this year, the National Bureau of Statistics said yesterday.
Profit in the first quarter rose 12.1 per cent to 1.17 trillion yuan, it said. Tax revenue growth for the first quarter also slowed by 4.3 percentage points from the same period last year, the Ministry of Finance said.
The data follows the supreme Politburo Standing Committee meeting on the economy on Thursday, which called for strengthening the mainland's economic growth momentum while guarding against financial risks.
"Profits are only growing in line with sales and with problems of overcapacity and the sluggish global picture. It doesn't bode well for a speedy return to higher profit margins," said Louis Kuijs, chief China economist at Royal Bank of Scotland.
"Heavy industries especially still face destocking and higher costs, but if there is a silver lining, industries catering to the consumer, like textiles, food and beverages, seem to be doing much better," Kuijs said.
Industrial growth is facing pressure amid slowing domestic and global demand, Xiao Chunquan, a Ministry of Industry and Information Technology spokesman, said on Tuesday.
Profits at industrial firms were at "very low levels" compared with the past few years due to falling product prices and surging costs, Xiao said.
The world's second-biggest economy grew 7.7 per cent year-on-year in the first quarter, down from 7.9 per cent in the fourth quarter and trailing the eight per cent median estimate in a Bloomberg survey.
China Iron and Steel Association chairman Zhu Jimin said yesterday that producers should not be misled by "bright spots", including improvements in downstream sectors like cars, railway and ship building.
"Downstream demand will gradually improve, but at the same time it is hard to see any relatively big rises in steel consumption, and the expectations of steel firms should not be too high, and they should not blindly expand output," Zhu said. He said Beijing was seeking new ways to restructure the sector, which was still facing massive problems.
Meanwhile, the finance ministry issued its quarterly tax report yesterday, saying tax revenue for the first quarter increased by six per cent.
The ministry attributed the slowdown in revenue growth to the slack economy, weak demand, falling imports and other tax reduction measures, Xinhua reported.
While tariffs on imports and profit tax revenues from energy firms fell by 27.5 per cent and 40.1 per cent respectively, the quarterly report said taxes related to property transactions grew by as much as 48.2 per cent over the same period last year.