China’s Q1 industrial profits still down, may improve soon

15 May 2009 12:25  [Source: ICIS news]

SHANGHAI (ICIS news)--China's first quarter industrial profits provide some reasons to hope that Asia's biggest emerging economy is turning around, economists said on Friday.

Official government data showed industrial profits in the January-to-March period fell at the same annual pace of 32% as the fourth quarter's.

But there had been a marked improvement in March that allowed the full-quarter decline in profits to ease from 39.3% average in the first two months, economists said.

Industrial profits in 22 regions in China totaled Yuan (CNY)322.7bn ($47.3bn) in the first quarter, according to the National Bureau of Statistics. In the first three months of the year, petroleum processing and coking industries’ profits rose to CNY17.39bn while the chemical fibre sector made CNY230m in profits.

"An improvement seen in March was largely because many companies resumed full operations in February. The government’s economic stimulus package has also started to take effect amid recovering demand," said Li Hongrong, an economist from Shenzhen-based Ping An Securities.

"The trend of economic recovery is in line with a slowing economic recession in western countries. The industrial production will [improve] in the second quarter," Feng Yuming, an economist from Orient Securities said.

"We think China’s economy is recovering along with the conclusion of destocking and improved demand from the auto and housing sectors," said brokerage firm Essence Securities in a recent report.

The country's manufacturing sector had indicated another month of expansion in April based on the Purchasing Manager' Index. The index, which is a baromater of manufacturing activities in China, had been steadily rising over the past five months.

($1 = CNY6.82)

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