SHANGHAI, Jul 27 (SMM) - In 1H 2021, the China economy experienced steady and enhanced growth and was on a positive development trajectory. Industrial production demand further recovered with improved business operations, leading to stable profits and rapid growth.
Stable Profits and Rapid Growth
In the first half of the year, profits of industrial enterprises above national scale increased by 66.9% year on year, or 45.5% over the same period in 2019; the two-year average growth was 20.6% (calculated based on the data of the same period in 2019 using the geometric mean method), maintaining a high-level growth. In the second quarter, profits of industrial enterprises above the scale increased by 36.0% year on year, or 42.5% over the same period in 2019, with a two-year average growth of 19.4%.
Profits of upstream mining industry and raw material manufacturing enterprises grew significantly. In 1H 2021, the mining industry and raw materials manufacturing industry profits increased by 1.33 times and 1.83 times respectively, and the combined contributions to industrial profits above the scale were 58.9%. In view of the improved economy, expanded demand, increased prices as well as lower benchmark in the same period last year, the profits chemical, iron and steel, coal industry rose 1.77 times, 2.34 times, 1.14 times.
Profits of high-tech and equipment manufacturing industries also maintained faster growth. In 1H 2021, the profit of high-tech manufacturing industry increased by 62.0% year on year, 15.6 percentage points faster than the average level of industries above the scale, pulling up the two-year average growth rate of profits in industries above the scale by 5.6 percentage points. Profits of equipment manufacturing industry increased by 39.5% year on year, an average growth rate of 18.3% over two years. Thanks to improved market demand, increased orders from enterprises, vigorous demand of LCD panels integrated circuits and containers among other factors, profits of electronics, automotive, electrical machinery, general equipment, metal products all managed growth between 34%-53% year on year.
Continuous Improvement in Business Operations
Revenue grew faster than costs, and the profitability level of enterprises continued to improve. In 1H 2021, the operating income of industrial enterprises above the scale increased by 27.9% year on year, faster than the operating costs and combined expenses. Unit costs and expenses fell year on year, the cost per 100 yuan of operating income decreased by 0.98 yuan; and the mining industry, raw materials manufacturing industry decreased 6.79 yuan and 2.64 yuan respectively. The operating income profit margin of industrial enterprises above the scale was 7.11%, an increase of 1.66 percentage points year on year and 0.47 percentage points higher than the first quarter.
The number of loss-generating enterprises decreased and the amount of losses fell. By the end of June, the loss of industrial enterprises above the scale was 22.5%, shrinking by 2.4 percentage points year on year and by 4.6 percentage points compared with the end of March. In 1H 2021, the losses of loss-generating enterprises decreased by 23.5% year on year. The loss situation of enterprises improved significantly compared with the same period last year.
Overall, industrial enterprises' profits recovered steadily in the first half of the year, and their operations continued to improve. However, it shall be pointed out that the uneven recovery among enterprise still exists, and the private sector and small to micro enterprises are relatively slow in revering their businesses; commodity prices stay high, squeezing the profitability of enterprises; weaknesses in the industrial supply chain remain. Next, the government will maintain the consistency, stability and sustainability in macro policies with focus on deepened structural reforms to the supply side.