Silver lining in slowing Chinese economy

As industrial profit decline narrows, the high-tech sector shines and the "Made in China" strategy gains momentum, many are upbeat that the clouds casting shadows on the Chinese economy are beginning to part.

For the first two months of the year, industrial profits declined 4.2 percent year on year, according to the National Bureau of Statistics (NBS). HSBC's preliminary purchasing managers' index (PMI) showed that manufacturing activity in March had fallen to an 11-month low of 49.2.

The economic growth rate registered in 2014 was 7.4 percent, its lowest level in 24 years. The government responded by setting the annual growth target for 2015 to "around 7 percent."

However, every cloud has a silver lining. In the case of the economy, the industrial profit decline has narrowed and the performance of high-tech manufacturers is healthy.

INDUSTRIAL UPGRADE

Profits of Chinese industrial businesses hit 745.24 billion yuan (121.5 billion U.S. dollars) in the first two months, down 4.2 percent, compared to an 8 percent decrease in December 2014.

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

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

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

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

Raw material production saw profits slow as the scaling back of the coal industry continues. Profits from oil drilling and coal mining plunged 74.9 percent and 62.6 percent, respectively.

In 2014, although China's industrial output grew 8.3 percent, down from 9.7 percent growth seen in 2013, the value-added of the high-tech manufacturing sector rose by 12.3 percent, four percentage points higher than industrial enterprises.

Meanwhile, research and development expenditure increased 12.4 percent year on year to 1.33 trillion yuan, accounting for 2.09 percent of gross domestic product (GDP), a record high.