China's industrial profits extend growth in December amid brisk factory recovery

BEIJING (Reuters) - Profits at China’s industrial firms grew for the eighth straight month in December, suggesting a sustained recovery as the manufacturing sector rapidly emerged from its COVID-19 slump.

FILE PHOTO: A worker welds iron at his steel product shop in Seoul January 29, 2013. REUTERS/Kim Hong-Ji

Profits surged 20.1% year-on-year in December to 707.11 billion yuan ($109.40 billion), after rising 15.5% in November, the National Bureau of Statistics (NBS) data showed on Wednesday.

China is the only major economy in the world to avoid a contraction in 2020, with gross domestic product up 2.3% for the full year, while many countries remain crippled by the pandemic.

Economists polled by Reuters expect China’s GDP to rise 8.4% in 2021, the fastest pace in a decade. However, some analysts cautioned that a slower recovery in consumption and a potential rapid slowdown in credit growth could be risks for the Asian powerhouse.

China’s factory gate prices fell last month at their slowest pace since February, pointing to improving corporate profitability.

For the full year of 2020, annual profits for China’s industrial firms grew 4.1% year-on-year to 6.45 trillion yuan, recovering from a 3.3% on-year decline seen in 2019. It was also quicker than a 2.4% gain seen in January-November.

The profit gains last year were notably driven by the manufacturing sector, which saw margins increase by 7.6%, said Zhu Hong, a senior statistician at the statistics bureau, in a statement published alongside the data.

China’s exports were surprisingly strong last year as factories raced to fill overseas orders amid a raging pandemic.

Liabilities at industrial firms rose 6.1% year-on-year at end-December, versus 6.8% growth as of end-November and a 5.4% uptick as of end-2019.

Earnings at China’s state-owned industrial firms were down 2.9% for 2020 year-on-year, compared with a 4.9% decline in January-November and 12.0% slump in 2019, the statistics bureau data showed.

Private sector profits grew 3.1% in 2020, improving from January-November’s 1.8% growth and stronger than 2019’s 2.2% rise.

The industrial profit data covers large firms with annual revenues of over 20 million yuan from their main operations.

Reporting by Stella Qiu and Ryan Woo; Additional reporting by Roxanne Liu; Editing by Sam Holmes