Signs of Economic Recovery in Central Gyeonggi?…March Industrial Profits Up 92% Year-on-Year

Expert: "Figures Due to Base Effect... Not a Positive Signal"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] China's industrial profits in March nearly doubled compared to the same period last year.

According to the National Bureau of Statistics of China on the 26th (local time), China's industrial profits in March increased by 92.3% year-on-year. A National Bureau of Statistics official stated, "Factory operating rates have risen, and sales revenue has also increased."

Eric Zhu, an economist in charge of China, said, "Industrial profits are expected to continue increasing over the next few months," adding, "Although the pace of economic recovery may be delayed more than expected depending on the COVID-19 situation, the profit growth rate could reach double digits at most." Since industrial profits are strongly supporting the economy, there is a high possibility that companies will engage in new hiring and investment, which is expected to have a positive effect on the overall Chinese economy.

The rise in producer prices is cited as a major factor behind the increase in industrial profits. The Producer Price Index (PPI) for March, released on the 9th, rose 4.4% year-on-year. This exceeded the forecast of 3.5% and marked the highest level since July 2018. As producer prices rose, companies also raised product prices, which is analyzed to have improved profit margins.

However, there are cautious voices warning that the sharp increase in industrial profits is due to a base effect and that risks still exist. The COVID-19 pandemic is ongoing, and vaccination rates within China are slow, so the economic outlook cannot be viewed optimistically.

Raymond Yung, chief economist at ANZ Bank, said, "The recently released statistics reflect a base effect due to last year's poor growth rate," adding, "Currently, Chinese industries are facing difficulties in procuring raw materials, and raw material prices continue to rise, so this is not an entirely positive signal."

The National Bureau of Statistics also added, "Economic uncertainties due to COVID-19 continue," and "Growth imbalances between industries still exist."