Industrial profit decline narrows, high-tech sector shines

China's industrial profits for the first two months of the year declined 4.2 percent year on year, narrowing from the 8-percent decrease seen last December.

Profits of Chinese industrial businesses hit 745.24 billion yuan (121.5 billion U.S. dollars) in the first two months, with high-tech manufacturing scoring the best performance, said the National Bureau of Statistics (NBS) on Friday.

The bureau's calculations include companies with annual revenue exceeding 20 million yuan.

NBS statistician He Ping attributed the profit decrease to lower prices, rising costs and significant profit decline in the oil and coal industries.

Despite the decrease, the industrial sector continues to modernize, with better performance in high-tech manufacturing, equipment and machinery manufacturing, the NBS data showed.

During the first two months of 2015, 30 of the 41 sectors surveyed reported year on year profit increases, with profit of high-tech manufacturing surging 48.4 percent year on year.

Raw material production along with other sectors saw profits slowdown as China continues scaling back the coal industry to eliminate excess production capacity. Profits from oil drilling and coal mining plunged 74.9 percent and 62.6 percent, respectively.

Private companies posted the strongest growth during the January-February period, with a profit increase of 9.1 percent year on year, while state-owned enterprises dropped sharply at 37 percent year on year.

Driven by the country's restructuring efforts amid the economic "new normal" of slow but quality growth, China's high-tech industry flourished with the value-added output of the high-tech sector growing 12.3 percent year on year in 2014, NBS data showed.

The high-tech industry accounted for 10.6 percent of the country's overall industrial value-added output in 2014, which rose 7 percent from 2013 to 22.8 trillion yuan (3.71 trillion U.S. dollars).

The fast expansion of the high-tech and modern service industries shows China's economy is advancing to the "middle and high end", said Xie Hongguang, deputy chief of the NBS.

China should work toward greater investment in "soft infrastructure" -- like innovation -- instead of "hard infrastructure" to climb the global value chain, said Zhang Monan, an expert with the China Center for International Economic Exchanges.

Indeed, to boost innovation has been put on the top of the government's agenda as China has pledged to boost the implementation of the "Made in China 2025" strategy, which will upgrade the manufacturing sector and help the country achieve a medium-high level of economic growth.

Accelerated industrialization is supported by the manufacturing sector and the "Made in China 2025" strategy, which can empower manufacturing while boosting the "innovated in China" brand, according to a statement released this week after an executive meeting of the State Council, presided over by Premier Li Keqiang.

Favorable policies will be mapped to help forge an upgraded version of the manufacturing sector and priority will be given to the development of ten particular fields, including information technology, new materials and agricultural machinery, said the statement. (Updated)