SCIO briefing on China's current economic performance

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Speakers:
Yang Weimin, vice minister of the Office of Central Leading Group on Financial and Economic Affairs;
Wang Zhijun, director of Division One on Economic Affairs, the Office of Central Leading Group on Financial and Economic Affairs;
Cong Liang, director-general of the Department of National Economy, the National Development and Reform Commission;
Xing Zhihong, spokesperson of the National Bureau of Statistics and director general of the Department of Comprehensive Statistics of the bureau

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
July 27, 2017

CRI:

Government data for the first half of this year showed that industrial profits grew 19.1 percent in June year on year, up 2.4 percentage points from the previous month's growth. Does the growth represent a turnaround in the real economy? And what will the economy be like in the second half of this year? What about the industrial profits?

Xing Zhihong:

With the deepened supply-side structural reform this year, the relationship between supply and demand has been improved, and we also saw a recovery in industrial product prices and industrial companies' operating conditions. According to the June data released this morning, we can see the following positive changes:

Firstly, profits maintained steady growth. The profits of industrial enterprises with annual revenue of 20 million yuan or more from their main business operations rose by 19.1 percent from the year before, up 2.4 and 5.1 percentage points from May and April respectively. Profits of large-scale industrial enterprises for the first half year increased by 22 percent from a year earlier, with growth level up 15.8 percentage points year on year.

Secondly, profits margin kept growing. The profits margin of industrial enterprises earning more than 20 million yuan from their main business operations increased 6.35 percent, up 0.29 percentage points from a year earlier.

Thirdly, the profits structure has been improved. Starting from the Q2,there's a new development in industrial profits growth. Industries upstream shared a smaller part in the newly-added profits, while industries in the middle and downstream shared more. Of the newly-added profits in June, the equipment manufacturing industry shared 40.7 percent of the total, up 11.3 percentage points from May; high-technology industries accounted for 19.3 percent, up 0.6 percentage points from May. As a typical upstream industry, the mining sector's portion of profits decreased by 13.4 percentage points from May, a fall for the second consecutive month.

Reasons for these positive changes in industrial enterprises' profits are as follow: firstly, we maintained a steady growth in market demand, and speeded up selling. In June, income from industrial enterprises' main business operations increased by 13.7 percent from a year earlier, up 0.6 percentage points than the May growth. This year, income from industrial enterprises' main business operations maintained double-digit growth, and the turnover of finished products was also speeded up. The turnover time of finished industrial products was 13.7 days in June, 0.8 days less than May. A number of the 34 industries in the second quarter of this year maintained price growth, showing market demand is increasing, which is also a major reason for the industrial enterprises to continue steady growth.

Secondly, the effect of taxes, fees and other costs cut was now felt. The government has been pushing forward supply-side reform since last year, and reducing costs is one of the major tasks. By cutting the taxes, fees and other costs relating to human resources, land, logistics, and systematic trade, industrial enterprises reduced their costs by 0.18 yuan per 100 yuan of income from their main business operations.

Thirdly, the upgrading and optimized supply strengthened the industrial enterprises' earning power. Under supply-side structural reform and innovation-driven development strategy, industrial enterprises proactively coped with the changes in market, and took effective measures to improve their equipment, crafts and technology. We can see that, in the first half of the year, not only the emerging industries maintained a good momentum, but also the traditional industries improved their operations through upgrading. Take the textile and garment industry as an example. This traditional industry rose by 12 percent in the first half of the year, up 9.6 percentage points from last year. Among the 41 sectors, 38 saw increased profits based on the improvements mentioned above.

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