Quick work resumption, robust global demand help offset COVID-19 effect

Profits for China's major industrial enterprises rose by 4.1 percent in 2020, reversing 2019's 3.3 percent decline, as Beijing's quick work resumption efforts and robust external demand helped offset the novel coronavirus epidemic effect, experts said.

Industrial profits rose for the eighth consecutive month in December and will recover further this year, thanks to the sustained domestic economic recovery, low base effects and improvement in overseas demand.

Profits at China's major industrial firms surged 20.1 percent year-on-year to 707.11 billion yuan ($109 billion) in December, according to data from the National Bureau of Statistics.

The rebound in industrial profits comes close on the heels of China becoming the only global economy to witness a positive GDP growth of 2.3 percent last year.

"The steady recovery in production and sales lent strong support for profit growth (last year)," said Zhu Hong, a senior statistician at the NBS.

The country's total added value of industrial enterprises with an industrial output above 20 million yuan grew by 2.8 percent on a yearly basis in 2020, and their sales revenue rose by 0.8 percent from a year earlier, according to NBS data.

Among the 41 industries surveyed, 26 sectors saw a year-on-year growth in total profits last year, up from 21 sectors in the first three quarters of 2020.

According to Zhu, the rebound in last year's industrial profits was mainly due to the manufacturing sector, which posted a 7.6 percent growth on a yearly basis.

Wu Chaoming, chief economist at Chasing Securities, said strong demand at home and abroad, the rebound in bulk commodity prices, accelerated industrial production and sales, the government's effective measures to support enterprises and robust capital market performance boosted industrial profits.

"The high growth rate may continue in the first half of this year, riding on the low base effect, strong domestic recovery and the resilience of the manufacturing, real estate sector," said Wu. "However, the growth rate may slow in the second half due to the dwindling effect of policies and slow recovery in small and medium-sized enterprises."

Looking ahead, Tao Jin, deputy director of the macroeconomic research center of the Suning Institute of Finance, expects industrial profits to see strong growth in the first half. "In general, profits will continue to recover in 2021, but the room for growth may be slightly smaller than that in 2020."

To sustain the economic recovery, Wu said more efforts are needed to increase support for micro, small and medium-sized enterprises, create more jobs, spur consumption, boost technological innovation and green economic development.