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The profitability of the Chinese industry declined by 4 percent

Asia / Business and Finance

Chinese statistics released Monday showed progress in the country's efforts to help reduce corporate leverage through supply-side structural reform.

The profitability of the Chinese industry declined by 4 percent

Profits for China's largest industrial enterprises fell 3.4 percent year-on-year in January-April, China's National Bureau of Statistics (NBS) reported on Monday.

Industrial enterprises with annual revenues of over RMB 20 million (about US $ 2.9 million) had a combined profit of RMB 1.81 trillion in the first four months of 2019.

Operating revenues for large industrial companies reached 32.84 trillion yuan, up 5.1 percent year on year, NBS data showed.

Zhu Hong, senior statistician at NBS, attributes the decline in profits to a lower value added tax rate that was introduced on April 1, which led to an earlier surge in industrial goods demand in March.

In four months, profits of state-owned industrial enterprises fell 9.7 percent year-on-year, while profits for private firms rose 4.1 percent.

Companies in the mining and manufacturing industries saw profit declines by 0.7 and 4.7 percent, respectively.

Of the 41 subsectors, 27 reported revenue growth and 14 reported revenue declines.

On the other hand, consumer goods and equipment manufacturers have maintained relatively rapid profit growth, reflecting structural improvements in the economy.

Major specialty equipment manufacturers posted 17.9 percent profit growth during this period, while electrical machinery and appliance manufacturers' profits grew 14.5 percent.

The structural changes coincided with a shift in the drivers of China's economic growth from exports and investment to domestic consumption and high-tech industries.

In the metallurgical and oil refining sectors, the profit of companies decreased by 28.1 and 50.2 percent, respectively, but the decrease was 16.4 and 4.3 percentage points less than in the period from January to March.

Large industrial enterprises showed improvement in performance. For every 100 yuan in revenue they received, the expenses they incurred fell 1.1 yuan from a year earlier to 88.7 yuan in April.

The ratio of assets to liabilities of large industrial companies continued to decline. The ratio was 56.8 percent at the end of April, which is 0.5 percentage points less than a year earlier. For state-owned industrial companies, this ratio fell by 1.1 percentage points to 58.4 percent.

The Chinese authorities have pledged to pursue supply-side structural reform and have launched a series of tax and levy cuts for firms in response to mounting downward pressures in the economy.

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