(Yicai Global) March 28 -- Profits at China’s large Industrial companies rose 5 percent from a year earlier in the first two months of this year, but analysts said headwinds in the economy may make it hard to sustain that level of growth.

Profits at industrial firms with an annual turnover of at least CNY20 million (USD3.14 million) totaled CNY1.16 trillion (USD182 billion) in the two months ended Feb. 28, the National Bureau of Statistics said yesterday. They rose 4.2 percent in December.

Efficiency at the firms has continued to pick up since last year and the modest profit growth was partly because of the high base of comparison from last year,  Zhu Hong, a senior NBS statistician, said at a press conference.

But uneven improvement in corporate profits persists and firms face many difficulties and challenges in production and operation, Zhu said, adding that the foundations for a sustainable recovery at industrial enterprises are not yet entirely solid.

For the year ended Dec. 31, profits at China’s large industrial enterprises jumped by 34 percent from 2020.

From January to February, thanks to accelerating industrial production and a surge in product shipment prices, sales at industrial firms rose rapidly, with revenue climbing by 14 percent year on year and 1.6 point from December, the NBS said.

Chasing Securities said it expects the downward pressure on profit growth in the first quarter may increase. The brokerage said the resurgence of Covid-19 has been severe, and the pressure on real estate investment remains, dragging down profits.

Moreover, government efforts to ensure the stability of supplies and prices will drive China’s commodity costs back to a balanced state, and coupled with the decline in overseas demand this may put an end to the increase in international commodity prices that has boosted profit growth, the broker added.

Amid the Russia-Ukraine conflict, commodity prices will most likely remain at a high level for the time being, led by crude oil, Zheng Houcheng, director of Yingda Securities Research Institute, told Yicai Global. And as the Covid-19 outbreak has not eased, profit growth at mid- and downstream companies will remain under pressure in March, he added.

The NBS’s Zhu stressed the need to ensure the supply of commodities at stable prices to reduce the corporate costs. He also mentioned support for manufacturing as well as tax-and-fee cuts for small and micro businesses, which will help stabilize the industrial sector.

Editor: Tom Litting