Corporate Leverage Is On The Decline: China’s Statistics Bureau

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China’s National Bureau of Statistics says that the latest data for October points to a decline in the corporate sector’s levels of leverage.

Official NBS data released on 27 November, indicates that during the period from January to October 2017 industrial enterprises above designated size saw a year-on-year profit increase of 23.3%, for an acceleration of 0.5 percentage points compared to the January-September period.

Profits for October saw a year-on-year increase of 25.1%, remaining comparatively high for 2017 despite a 2.6 percentage point deceleration compared to September.

According to NBS in addition to strong profit growth China’s industrial enterprises are seeing improving performances on multiple fronts.

As of the end of October the debt-asset ratio for industrial enterprises above designated size was 55.7%, for a year-on-year decline of 0.5 percentage points.

For state-owned share-controlled enterprises the ratio was 60.9%, for a decline of 0.5 percentage points compared to the same period last year, and 0.1 percentage points compared to September.

The corporate sector, and the state-owned enterprise sector in particular, accounts for the preponderance of China’s worryingly high debt levels, prompting both President Xi Jinping and State Council to refer to deleveraging in this area as the “priority of priorities’ earlier this year.

In addition declining leverage, NBS reports that China’s large-scale industrial enterprises are also seeing reductions in costs, a fall in the percentage of loss-making enterprises, as well as an acceleration in capital turnover and ongoing improvements to operating efficiency.

China’s coal, steel, industrial chemical and petroleum sectors have posted a robust increase in profits.

During the period from January to October 2017, the coal extraction and washing sector, the ferrous metal smelting and rolling sector, the industrial chemical raw materials and finished products sector, and the petroleum and gas extraction sector saw combined new profits of 603.4 billion yuan, for a 51.2% contribution rate to the profit growth of industrial enterprises above designated size.

The hi-tech manufacturing sector and emerging industries of strategic importance have also maintained comparatively rapid growth.

For the period from January to October the main operating income of the hi-tech manufacturing sector saw a year-on-year increase of 13.6%, ahead of growth for all industrial enterprises above designated size by 1.2 percentage points.

Emerging industries of strategic importance posted year-on-year growth in main operating revenue of 13.1% across the same period, ahead of growth for all industrial enterprises above designated size by 0.7 percentage points.

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