Oct 28, 2015
A devaluation of the yuan in August and the government’s ongoing fiscal support measures helped stabilize profits in China’s manufacturing industry last month, which had been in steady decline.
The net profit of manufacturing companies fell 0.1 percent year on year in September to 535.7 billion yuan (US$84.3 billion), but rose 19.5 percent from 448.1 billion yuan in August, the National Bureau of Statistics said yesterday.
The dip in annual terms was significantly lower than the 8.8 percent year-on-year fall recorded for August.
He Ping, a researcher at the bureau, said the improvement in the figures was mostly driven by the weaker yuan, as many Chinese manufacturers rely heavily on exports, so their goods were more attractive to overseas buyers.
“Many companies benefited from the changes in foreign exchange rates, and also from other incentives, like lower taxes, introduced by the government to help revive the economy,” he said. “Overall, operational costs rose only 1.9 percent in September, compared with an increase of 22.9 percent in August.”
“An increase in the credit supply and steadily falling prices at the factory gate also helped to boost profit margins,” He added.
The People’s Bank of China last Friday cut benchmark interest rates and lowered banks’ reserve requirement ratio — the proportion of funds they are obliged to hold in reserve — for the fifth time this year.
The producer price index, a measure of inflation at the factory gate, fell 5.9 percent year on year in September, extending its downward trajectory to a 43rd month.
Despite the improved profit position in September, UBS economist Wang Tao said the broader picture was unchanged in showing weakness in China’s manufacturing sector.
“The move by the central bank last week shows that the government remains concerned about the outlook for the manufacturing sector, as well as deflationary pressures and the rising debt burden,” she said.
The bureau’s He reiterated that point, saying that although the rate of decline slowed in September, manufacturing companies’ profits were still down from last year, while their sales dipped for first time in many years.
“This indicates continued sluggish demand and operational difficulties,” he said.
In the first nine months of the year, profits in the manufacturing sector fell 1.7 percent year on year to 4.3 trillion yuan. The rate of decline was slower than the 1.9 percent dip recorded for the first eight months.
In the manufacturing sub-groups, private companies performed best in September, booking a 7.1 percent year on year profit rise to 1.52 trillion yuan. Overseas-funded firms saw their profits increase by 0.2 percent to 1.06 trillion yuan, the bureau said.
State-owned firms were the big losers in the month, as their combined profits fell 24.4 percent year on year to 833.9 billion yuan, it said.
Among the 41 sectors that comprise the manufacturing industry, profits rose in 30 and fell in 11, the bureau said, adding that food processing, textile, refinery and chemical firms were September’s star performers.
The government said earlier that China’s gross domestic product rose 6.9 percent in the third quarter, its slowest in six years.
Trade volume fell 7.9 percent in the first three quarters, far behind the government’s target of a 6 percent rise for the year.
The official purchasing managers’ index, a gauge of conditions in the state-owned manufacturing sector, fell to 49.8 in September, its second straight month below the 50-point line that separates growth from contraction.
Source: Shanghai Daily