Profit Growth of Chinese Industrial Enterprises Expected to Stay Above 10%

The profit growth of China’s industrial enterprises is expected to remain at robust levels in 2018.

Zhu Jianfang (诸建芳), chief economist for CITIC Securities, said to Economic Information Daily that he expects 2018 industrial enterprise profits to grow by between 10 – 12% in 2018.

Zhu said that industrial output will maintain medium-to-high growth, following a revival in global trade and Chinese capital expenditures, as well as investment by real estate developers in excess of forecasts.

Lagging growth in supply relative to demand for industrial goods will provide support to prices, with full-year PPI expected to rise by 3 – 4%, helping to buttressing industrial enterprise profit growth.

Zhu further points out that China’s industrial sector capacity-utilisation rate has remained above 76% since the second half of 2017, for its highest plateau in nearly five years.

This is a sign that cyclical Chinese industries have reached a “liquidation” phase and that the problem of excess capacity had basically been resolved, which would bolster the profitability of industrial enterprises.

Zhu also points out that multiple factors are driving a fresh round of expansion in capital expenditures in the industrial sector, chief amongst them the historically low debt-asset ratio of under 57% for China’s industrial enterprises from 2016 until the present.

China will also launch a new round of key engineering technology upgrades, while 800 billion yuan in tax cuts will spur a revival in the manufacturing sector.

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