China April industrial profit growth rebounds to six-month high

Employees working at a factory in Huaibei in China's eastern Anhui province. (AFP)
Updated 27 May 2018

China April industrial profit growth rebounds to six-month high

  • Employees working at a factory in Huaibei in China's eastern Anhui province. (AFP)
  • Higher factory prices and stronger demand help rebound

BEIJING: Profits earned by Chinese industrial firms in April rose at their fastest pace in six months, data from the National Bureau of Statistics (NBS) showed on Sunday, as factories benefited from higher prices and strong demand.

Profits in April rose 21.9 percent year-on-year to 576 billion yuan ($90.14 billion), the quickest since October, bringing gains for the first four months of 2018 to 15 percent.

The data suggests China’s industrial sector is still seeing solid growth momentum despite curbs on pollution and rocky trade relations with the US.

Last month’s rebound was helped by lower comparison figures for April 2017, higher factory prices and stronger demand, He Ping, head of NBS’ industrial division, said in a statement.

It was a significant improvement over March’s 3.1 percent growth that was the slowest in over a year and which government officials had blamed on the timing of the Lunar New Year holiday.

The higher April data should help ease concerns of slowing momentum in China’s economy as the country implements tougher pollution controls on “smokestack” industries and cash-strapped regional governments cut back on big investment projects, curbing demand for building materials.

Profit growth for Chinese industrial firms has softened from last year’s strong pace as factory gate price gains weaken. In the first four months of 2017, profits rose 24.4 percent.

China’s producer price inflation picked up to 3.4 percent in April from March but was much lower than 6.4 percent in the year-ago period.

Weaker profit growth suggests companies may be reluctant to invest and hire new staff, while making it harder for debt-laden firms to service their debt, especially state-owned enterprises that account for the bulk of the country’s high leverage.

A Reuters analysis showed that debt growth for Chinese companies has slowed to the lowest rate in more than a decade, but companies have also seen profit margins squeezed to their lowest level in two years.

April economic data had shown signs of slowing momentum as investment growth touched a near 20-year low and retail sales growth weakened.

Despite stronger-than-expected first-quarter economic growth, economists polled by Reuters still expect a gradual slowdown to around 6.5 percent this year from 6.9 percent in 2017, as rising borrowing costs weigh on consumption and investment.

Beijing continues to call for tighter controls on risky investments and speculation in the property sector, but does not want to cut off funding to firms in the “real economy” such as manufacturing firms that are a key source of jobs.

There have also been signs that policymakers have moved to a slighter looser stance as they look to ensure growth doesn’t slow too much, while also keeping financial risks under control.

No industrial sectors recorded year-on-year losses over January to April, the data showed.

But earnings in the computer and telecommunications sector fell 5.3 percent over the four months, though that was a slight improvement from an 11 percent decline in the first quarter.

Liabilities of industrial firms rose 6.1 percent year-on-year as of end-April, according to the statistics bureau.

Profits at China’s state-owned firms rose 26.2 percent to 627 billion yuan for Jan-April, compared with a 23.1 percent rise in the first quarter.

Renault board to meet on Thursday for Ghosn replacement

Updated 52 min 48 sec ago

Renault board to meet on Thursday for Ghosn replacement

  • Carlos Ghosn has already been stripped of his positions as chairman of Nissan and Mitsubishi
  • The French government is Renault’s biggest shareholder, with a stake of more than 15 percent

PARIS: French carmaker Renault said Tuesday that it would hold a board meeting Thursday to name a replacement for its boss Carlos Ghosn, who remains in custody in Japan over alleged financial misconduct.
Sources close to the discussions said that the company would put forward Thierry Bollore to replace Ghosn as chief executive and Michelin chief Jean-Dominique Senard as board chairman. Ghosn currently holds both roles.
Ghosn has already been stripped of his positions as chairman of Nissan and Mitsubishi in the wake of the allegations.
The French government, Renault’s biggest shareholder with a stake of more than 15 percent, is particularly keen to see the company appoint a new leader.
Ghosn, who was arrested on November 19, is set to remain behind bars for the forseeable future after a Tokyo court denied him bail on Tuesday.
Prosecutors suspect he under-declared his income in official statements to Nissan shareholders between 2010 and 2015 to the tune of some five billion yen ($46 million), apparently in an attempt to avoid accusations he was overpaid.
A separate but similar charge is that he continued to do this between 2015 and 2018, under-reporting his income by a further four billion yen.
He also faces a complex charge of seeking to shift personal investment losses onto Nissan’s books and transferring company funds to a Saudi contact who allegedly stumped up collateral for him.