Affected by the rising prices of industrial products, the profit growth of raw material industry and the effect of tax reduction and fee reduction policies, the profits of Industrial Enterprises above Designated Size achieved high growth last year.
According to the data released by the National Bureau of statistics on January 27, the total profits of Industrial Enterprises above Designated Size in China in 2021 were 8709.21 billion yuan, an increase of 34.3% over the previous year, 39.8% over 2019 and an average increase of 18.2% over the two years.
However, the growth rate of industrial profits continued to decline in December. Industrial Enterprises above Designated Size achieved a total profit of 734.2 billion yuan, a year-on-year increase of 4.2%, the lowest value in the year.
According to the analysis of many experts, as the prices of industrial products peak and fall, the growth rate of enterprise profits will gradually return to the steady growth range. We should implement policies such as reducing taxes and fees, ensuring supply and stabilizing prices, vigorously help enterprises to alleviate difficulties and stimulate the vitality of market players.
upstream and downstream profit differentiation alleviated
Quarterly, in the first, second, third and fourth quarters of 2021, the profits of Industrial Enterprises above designated size increased by 137.3%, 36.0%, 14.3% and 12.3% respectively year-on-year.
Zhu Hong, Senior Statistician of the industry department of the National Bureau of statistics, said that due to factors such as the high base, the year-on-year growth rate was high before and low after. However, compared with 2019, the average profit of each quarter increased by 22.6%, 19.4%, 15.1% and 16.5% respectively in two years, all maintaining a high growth rate, and the good situation of enterprise benefits was further consolidated.
Among the 41 major industrial industries, 32 industries increased their profits over the previous year, accounting for 78.0%, and the growth area of the industry increased by 14.6 percentage points over the previous year. The profits of some industries have achieved rapid growth. The profits of 6 industries have more than doubled, and the profits of 18 industries have achieved double-digit growth.
By industry, the mining and raw materials industry has a strong pull on profit growth. In 2021, driven by the rise of commodity prices, the profits of upstream mining and raw material manufacturing increased by 190.7% and 70.8% respectively over the previous year, both significantly higher than the average level of industries above designated size. Among them, the prices of coal and crude oil increased significantly during the year and the high-level operation time was long, driving the profits of coal and oil and gas mining industries to increase by 212.7% and 584.7% respectively over the previous year.
The leading role of high-tech manufacturing industry is more prominent. In 2021, the profit of high-tech manufacturing industry increased by 48.4% over the previous year, with an average growth of 31.4% in two years, showing strong development vitality. Among them, the profit growth of pharmaceutical, electronic and communication equipment manufacturing industry was strong, with an increase of 77.9% and 44.0% respectively over the previous year, making a great contribution to the profit growth of high-tech manufacturing industry.
Due to the continuous promotion of the measures to ensure supply and stabilize prices, the effect of the policy of helping enterprises to bail out appeared, the rapid rise in the prices of some raw materials in the upstream was initially curbed, the cost pressure of downstream industries was relieved, and the profit structure showed the characteristics of improvement.
From January to December, the profits of upstream mining and raw material manufacturing accounted for 41.0% of all industries, down 1.4 percentage points from January to November, falling for two consecutive months; In the same period, the profits of the midstream equipment manufacturing industry and the downstream consumer goods manufacturing industry increased by 1.5 and 0.8 percentage points respectively month on month, and the profit differentiation between the upstream and downstream eased.
Wu chaoming, chief economist of Caixin securities, analyzed China first finance and economics. From the perspective of profit growth, the high profit level in the upstream slowed down and the profit margin in the middle and downstream improved. For example, from January to December, the average profit growth rate of midstream equipment manufacturing industry and downstream consumer goods manufacturing industry increased by 0.9 and 0.3 percentage points respectively compared with January to November; However, the profit improvement of midstream equipment manufacturing industry mainly depends on computer communication and other equipment and automobile manufacturing industry. The profit recovery medicine of downstream consumer goods manufacturing industry is still the main support, and the profit improvement of most other midstream and downstream industries is still limited.
Gao Ruidong, chief economist of Everbright Securities Company Limited(601788) also believes that the profit growth rate of industrial enterprises accelerated and fell in December, but the structural differentiation eased significantly. Specifically, in December, the price of industrial products continued to fall, and the profit margin of enterprises decreased, driving the growth rate of enterprise profits to continue to slow down; In terms of sub structure, the balance of industry profits has been greatly improved, the proportion of profits of upstream enterprises has continued to decline, and the proportion of profits of middle and downstream enterprises has increased significantly, which has become the core contribution to the profit growth of industrial enterprises.
profits will gradually return to the steady growth range
Zhu Hong said that in 2021, the profits of industrial enterprises increased rapidly and the benefit level increased steadily. However, the profit growth rate dropped significantly in November and December. The downstream industries, especially small and micro enterprises, are still under great operating pressure. The number of loss making enterprises is still large, and the amount of loss is growing rapidly year-on-year. There is pressure for the continuous improvement of the efficiency of industrial enterprises. The sustainable and stable development of industrial economy in 2022 still faces many challenges.
Luo Junjie, spokesman of the Ministry of industry and information technology and director of the operation monitoring and Coordination Bureau, said at a press conference of the state information office on the 20th that the current trend of stable recovery of industrial economy is still not solid, especially the trend of global epidemic still has great variables, the momentum of economic and trade growth has weakened, and hidden worries about China’s supply constraints still exist, The demand for consumption and investment is still weak, and the production and operation of small and medium-sized enterprises are also facing many difficulties and challenges. Superimposed on the recent spread of the epidemic and the base effect, the industrial economy is still facing great downward pressure in the first quarter of this year.
According to Wu chaoming’s analysis, the pressure of industrial profit slowdown or increase in the first quarter of 2022. First, China’s epidemic situation superimposed on the pressure of falling real estate investment is still large, which will have a great impact on the production demand side of enterprises and drag down profits. Second, maintaining supply and price stability will drive the commodity prices priced in China back to equilibrium. In addition, the decline of overseas demand, the recovery of supply margin or the end of the rise in international commodity prices, it is expected that the support of industrial product ex factory price (PPI) for industrial profits will be weakened. Third, the profit base of industrial enterprises in the first quarter was high, which was not conducive to its growth.
Since last year, the price of industrial products has continued to rise, and the year-on-year growth rate of PPI has risen from 0.3% at the beginning of the year to 13.5%, which has driven the significant improvement of enterprise profit margin, and the profit growth rate has continued to be in the high growth range.
Gao Ruidong believes that under the continuous decline of industrial product prices, the downward trend of enterprise profit growth has been determined, and will gradually return to the steady growth range, and the profit structure will continue to be optimized. However, it should also be noted that at this stage, the foundation of the recovery of manufacturing enterprises is unstable, the cost pressure faced by middle and downstream enterprises is still large, the enterprise inventory continues to be high, and the financing demand continues to be weak. In the next stage, we need to continue to increase precise support for the manufacturing industry, further ensure supply and price stability, maintain a moderately loose monetary policy environment, and promote the healthy and stable operation of the industrial economy.
Zheng Houcheng, director of Yingda Securities Research Institute, told first finance that the cumulative year-on-year probability of total profits of industrial enterprises in 2022 was higher than 10.0%. This year, greater efforts will be made to reduce taxes and fees, which will largely support the operating income profit margin of industrial enterprises in 2022, and then support the growth rate of total profits of industrial enterprises in the whole year.
steady growth through multi-party efforts
The central economic work conference in December last year made it clear that this year’s economic work should be stable and seek progress while maintaining stability. Recently, the Ministry of industry and information technology and the national development and Reform Commission jointly issued the implementation plan on Invigorating the operation of industrial economy and promoting high-quality industrial development, and put forward 16 policies and measures to stabilize industrial growth from four aspects, which effectively boosted the operation of industrial economy.
Luo Junjie said that in the next step, according to the new situation and changes, the Ministry of industry and information technology will, together with relevant departments, launch more powerful and effective policy measures from the aspects of finance, taxation and finance, ensuring supply and stabilizing prices, supporting the development of small and medium-sized enterprises, do a good job in pre adjustment, fine-tuning and cross cycle adjustment, play a good “combination fist” and “chain trick” for steady industrial growth, and promote the steady development of industrial economy in the first quarter, In order to stabilize the economic market, we should give full play to the role of “ballast stone”.
The Ministry of finance also said recently that it will actively launch policies conducive to economic stability in 2022, and the policy force will be appropriately advanced. We will implement new and greater combined tax cuts and fee reductions according to the needs of market players. Focus on the high-quality development of manufacturing industry, and support the relief of small, medium-sized and micro enterprises and individual industrial and commercial households. In 2021, China’s new tax cuts and fees will exceed 1 trillion yuan.
Xu Hongcai, Vice Minister of finance, said on the 25th that greater efforts will be made to reduce combined tax and fees in 2022 mainly from four aspects: focusing on high-quality development of manufacturing industry, focusing on small and micro enterprises and individual industrial and commercial households, focusing on strengthening local financial resources and combating tax evasion and tax fraud.
Luo Zhiheng, chief economist of YueKai securities, told China first finance and economics that it is necessary to introduce new tax reduction policies to improve the anti risk ability of market subjects, and reflect the structural, precise and effective nature at the same time. In the future, we should continue to increase financial support for rescue, further promote tax reduction and fee reduction, flexibly and accurately use a variety of financial policy tools, and promote the alleviation of the pressure of rising costs, so as to effectively boost market confidence and vitality.
In terms of monetary policy, recently, reserve requirements and interest rates have been cut one after another. From December last year to January this year, the quoted interest rate (LPR) of the loan market decreased for two consecutive months. In December last year, the central bank comprehensively reduced the reserve requirement by 0.5 percentage points and released about 1.2 trillion yuan of long-term funds.
In 2022, “stability” remains the main tone of monetary policy. Liu Guoqiang, vice president of the people’s Bank of China, said that policies should be fully, accurately and forward, and the monetary policy toolbox should be opened wider to avoid credit collapse.
