China January-February industrial profit up but mired in single-digits

Profits at China's industrial firms grew at a faster pace in January-February, official data showed on Sunday, in line with other signs of momentum in the economy, although the outlook is clouded by domestic COVID-19 outbreaks and the Ukraine conflict.

Profits rose 5.0% in January-February from a year earlier, compared with a 4.2% gain reported in December, said the National Bureau of Statistics.

The growth in January-February was driven by surging profits in the energy and raw materials sectors, thanks to higher prices of commodities such as crude oil and coal.

But, downstream, monthly profit growth among other industrial firms has been weighed down by high raw material costs, languishing in the single-digits since November.

The slightly faster industrial profit growth was in step with the improvement in industrial output, retail sales and fixed-asset investment in January-February, suggesting the impact of recent policy measures were starting to be felt.

Still, new challenges have emerged this year including the most serious outbreak in COVID-19 in China since 2020, threatening to disrupt local economies and further chill consumer spending.

Global upheavals such as the war in Ukraine have also created uncertainty over international supply chains and the potential for even higher commodity and energy prices, ultimately weighing on the bottom-line of Chinese firms.

Vice Premier Liu He said last week that Beijing will take measures to boost the economy in the first quarter and that monetary policy would be set to support growth.

To ease financial burdens for smaller firms, China has pledged around 1.5 trillion yuan of Value Added Tax (VAT) rebates.

On Thursday, the finance ministry said China will exempt the 3% VAT levied on some small firms, the country's main source of jobs.

The statistics bureau's industrial profits data covers large firms with annual revenues above 20 million yuan from their main operations.

(Reporting by Ryan Woo, Ellen Zhang and Huiling Zhou; Editing by Christopher Cushing)