China’s major industrial enterprises achieved a total profit of 2.73 trillion yuan (0.413 trillion US dollars) from January to May this year, up 16.5 percent year-on-year, according to the National Bureau of Statistics (NBS).

In May alone, the total profits of China’s major industrial enterprises reached 607.06 billion yuan (91.89 billion US dollars ), a year-on-year increase of 21.1 percent.

He Ping, from the Industrial Division of NBS, attributed the increase to four reasons. 

First, noticeable and sustainable outcomes can be seen from the supply-side reform with lower costs in industries. The cost of main business income per 100 yuan (15.1 US dollars ) for major industrial enterprises was 92.59 yuan, a year-on-year decrease of 0.35 yuan. The deleveraging process also went well. The asset-liability ratio of major industrial firms stood at 56.6 percent, reducing 0.6 percentage points compared with last year. 

Second, the overall performance of industrial enterprises is improved. At the end of May, the turnover days of finished goods inventory were 16.6 days, a year-on-year decrease of 0.2 days. Profitability has obviously increased as well. The profit rate of main business income was 6.36 percent, an increase of 0.35 percentage points year-on-year.

Third, the biggest contributor of profit growth is raw materials processing industries.

Industries with more new profits were mainly processing industries. Ferrous metal smelting and pressing industry, for example, enjoyed a 1.1-time profit increase. Non-metallic mineral products industry enjoyed an increase of 44.6 percent. Chemical raw materials and chemical products manufacturing saw a profit increase of 27.7 percent. Oil and natural gas exploration industry enjoyed 2.6-time increase in its profit. Power heat production and supply industry saw a profit increase of 27.8 percent. These five industries all together nearly contributed a profit increase of 70 percent.

Moreover, rising prices and lower costs helped boost profit growth. The effect of price changes on profit growth in May was 4.3 percentage points higher than that in April, according to preliminary calculations.

Although the growth rate of industrial profits in May was slightly lower than that in April, it still maintained rapid growth. In addition to reduced costs, it also benefited from price increases. In May, China’s Producer Price Index (PPI) rose by 4.1 percent year-on-year. The purchase price of industrial producers rose by 4.3 percent year-on-year.