Industrial profits 'pick up'

April's company earnings hit $70.48b: NBS

Growth of China's industrial profits picked up in April, but mainly due to a low comparative base, suggesting that lackluster demand is still a factor in the world's second-largest economy.

Industrial company profits rose 9.3 percent year-on-year to 437 billion yuan ($70.48 billion) in April after a 5.3 percent rise in March, the National Bureau of Statistics said on Monday.

The faster expansion was mainly due to more active production in industries such as electric power, automobiles and telecommunications, said an NBS statement.

During the first four months, total industrial profits were at 1.61 trillion yuan, up 11.4 percent year-on-year and slower than the 12.1 percent increase from January to March, the NBS said.

"The net income growth of industrial companies in April was stable," said Yu Jianxun, an economist with the NBS.

A reasonable growth in industrial profits may boost fixed-asset investment, which can lead to a steady rebound in economic expansion, economists said.

However, it's unlikely that the government will release aggressive stimulus packages to chase a "super-high" growth rate, they added.

According to the NBS, industrial output growth accelerated in April to 9.3 percent year-on-year, compared with 8.9 percent in March. The official Purchasing Managers' Index slowed to 50.6 from 50.9, because of a decline in new orders, suggesting a more moderate industrial activity in the coming months.

Zhu Haibin, chief economist in China at JPMorgan Chase & Co, said he expects modest economic growth this year. The downside risks may lower GDP growth to 7.6 percent this year compared with 7.8 percent in 2012, he said.

"As the economic structural reform continues, the problem of excess production capacity in industrial companies is still serious, which slows the cyclical recovery," Zhu said.

A report from the State Information Center, a government think tank, said on Monday that China is expected to have difficulties maintaining high-speed investment growth.

In the short term, until the end of the second quarter, investment growth is expected to remain stable, with a forecasted fixed-asset investment increase of 21 percent.

James Glenn, an economist at National Australia Bank, said that the indicators released so far may lead to a shift in the tightening monetary policies by the People's Bank of China.

"We think that they are likely to refrain from more heavy-handed moves, such as raising the reserve requirement ratio, while growth foundations are not looking solid," Glenn said.

However, Glenn said that the PBOC will continue to use market operations to control liquidity and manage the impact from capital inflows.

"The Chinese central bank is also wary about potential inflation pressures," he added.