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This article was originally posted in the Gongkong news center and is part of a new series aimed at raising awareness of China's Industry 4.0 Initiative.

Industrial profits continue to maintain good growth momentum - Dr. Ping He of the National Statistics Bureau interprets industrial profits data from January to April 2017

The May 27 release of industrial enterprise financial data by the National Statistics Bureau show that from January to April 2017, the total profits of industrial enterprises increased by 24.4%, which slowed by 3.9% compared to January to March. Profit growth for April was 14%.

1) Industrial profits continue to maintain good growth momentum

Industrial profit growth is slowing, which is reasonable given the previous high growth. In overall, the industry currently still maintain a good profit growth.

(A) Profit growth for the month of April has been higher than the level of recent years. For 2012-2016, monthly profits of industrial enterprises increased 5.3%, 12.2%, 3.3% - 2.3% and 8.5% respectively, which were lower than the level of growth in April this year.

(B) Cumulative profit maintains a high growth rate. For January - April, industrial enterprises realized a total profit of 2.27 trillion yuan with a growth rate of 24.4% and an increase of 447.3 billion yuan, the highest since the same period in 2012.

2) Consumer goods and high-tech manufacturing industries provide strong support for profit growth, overall enterprise efficiency continues to improve

(A) Consumer goods and high-tech manufacturing contributed strongly to profit growth in April, where the consumer goods manufacturing sector accounted for 21.6%, an increase of 9.8% from March, and high-tech manufacturing accounted for 23.2%, an increase of 19%. The raw material manufacturing industry accounted for 22.9%, down 15.2% from March.

(B) In April, business income margin for industrial enterprises was maintained at 5.79%, an increase of 0.1%.

(C) The state of receivable accounts in companies has continued to improve. In late April, industrial enterprises accounts receivable averaged a  payback period of 38.4 days, which is a 1 day year-on-year reduction which continues the trend since the beginning of the year.

(D) Debt status of companies have continued to improve.In late April, industrial enterprises debt ratio was 56.2%, down by 0.6%.

(E) Turnover rates of finished products continued to accelerate. In late April, the average turnover for finished products was 14.4 days, which a decrease of 0.7 days compared to last year.

3) Effect of price factors on profit growth

(A) Prices of sold finished products and procured raw materials have returned to normal. In April, prices of industrial products rose 6.4% year-on-year, but dropped by 1.2% compared to March; raw material procurement prices rose by 9%, but dropped by 1% compared to March. Overall, price levels tend towards a normal level. According to preliminary estimates, industrial enterprises have increased by about 52.1 billion yuan in profit due to price factors, which is less than the about 59.5 billion yuan increase in March.

(B) Profit growth for iron and steel, automotive and chemical industries are slowing down in April, mainly due to fluctuations in price, slowing production and sales growth, rising costs and other factors.

- Profits growth in the metal smelting and processing industry decreased by 7.8% year-on-year, while it grew by 1.3 times in March

- Profits growth in the automotive industry decline by 6.7% year-on-year, while in March grew by 18.7%

- Profits growthin the chemical raw materials and chemical products grew by 13% year-on-year, with the rate of growth rate down by 20.8% compared to March

- Profits growth in the new oil and natural gas industry amounted to 5.45 billion yuan, 9.86 billion less than the growth in March

- Profits growth in the electricity and heat production and supply industry fell by 42% year-on-year, a decline of 14.4 percentage compared to March.

Together, the impact of price factors on these five industries amount to a profit growth slowdown of 10.8%.

Currently, in order to maintain steady growth in industrial profits, we need to pay close attention to the following:

1) Given that raw materials procurement prices rose faster than prices of finished products, rising costs impacted profits of the entire industry especially downstream. In April, the cost of production per hundred yuan profit for industrial enterprises was 86.22 yuan year-on-year, which was up 0.18 yuan.

2) There is upward pressure on operating expenses for enterprises. In April, financial expenses increased by 4.2% year-on-year, which is 1.2% higher than in March.