* March industrial profits up 23.8 pct y/y, Q1 up 28.3 pct
* Construction boom spurs prices of building materials
* But rate of growth is slowing as commodities prices recoil
(Adds breakdown by sectors and quotes from stats bureau)
BEIJING, April 27 Profits earned by China's
industrial firms rose 23.8 percent in March from a year earlier,
buoyed by a continued construction boom, though the pace of
growth eased from multi-year highs seen in previous months.
Profits in March rose to 688.7 billion yuan ($99.9 billion),
the National Bureau of Statistics (NBS) said on its website on
In the first quarter, industrial profits climbed 28.3
percent to 1.7 trillion yuan, slowing from growth of 31.5
percent in the first two months but still robust enough to
suggest a further recovery in fixed asset investment in China in
Higher government infrastructure spending and a frenzied
housing market have helped spur sales and prices of building
materials, reviving profits for the country's long-ailing
"smokestack" industries such as steel mills and smelters and
giving them stronger cash flow to reduce a mountain of debt.
But firms further down the supply chain are seeing pressure
on profit margins as they struggle to pass on higher input costs
to consumers amid stiff competition.
"Purchasing prices are rising too quickly which is
increasing pressure on companies that are trying to cut raw
material costs," NBS official He Ping said in a statement
accompanying the data, adding that financial costs for
businesses are also rising.
Indeed, profits of equipment manufacturers rose 6 percentage
points from the pace in Jan-Feb, while profits for makers of
consumer products were up just 0.5 percentage points.
Profits for miners and producers of other raw materials
fell 0.9 and 9.5 percentage points, respectively, likely
reflecting a recent tumble in China's highly speculative
commodities futures markets.
Shares of material companies have recoiled from
their highest level since the 2015 market crash, while
infrastructure stocks have pulled back from
multi-month highs, though both are still up solidly so far this
All 13 steel companies that published first-quarter results
as of April 19 reported net profits had more than doubled, the
China Securities Journal said last week, with Nanjing Iron and
Steel posting a surge of 4,830 percent.
Fatter profits for steel mills could make Beijing's job
tougher as it tries to reduce industrial overcapacity by closing
more inefficient and heavily polluting plants.
China's largest oil and gas producer, PetroChina
, said earlier this month that it expected a
first-quarter profit of 5-6 billion yuan, down slightly from the
preceding quarter, but a turnaround from a huge loss a year
Many analysts, however, believe producer price inflation in
China is peaking, which could temper profitability later this
year and rob the world's second-largest economy of some
Still, strong first-quarter profits, together with an
increase of 14.1 percent in fiscal revenue, have set "an
excellent foundation" for improved growth quality in 2017, Ning
Jizhe, vice chairman at the National Development and Reform
Commission (NDRC), told the People's Daily in an interview on
China's government has lowered its economic growth target to
around 6.5 percent this year from a range of 6.5-7 percent last
year and an actual rate of 6.7 percent.
First-quarter growth came in at a faster-than-expected 6.9
percent, which could give the economy enough of a tailwind to
hit Beijing's full-year target even if growth starts to fade in
coming quarters as many analysts expect.
Policymakers in China are pushing a bullish message on the
world's second-biggest economy, pointing to a slowdown in
capital outflows and a stable yuan after a selloff last year
stoked fears of instability.
Ning told the state-run newspaper that market watchers
should not be too sensitive to minor fluctuations in the
economic growth rate and should pay more attention to the
quality of growth instead.
Earlier this month, the International Monetary Fund raised
its 2017 growth projection for the Chinese economy to 6.6
percent from 6.5 percent.
Industrial firms' liabilities rose 6.6 percent from a year
earlier as of end-March, unchanged from the pace seen in the
first two months of 2017.
The profit data covers large enterprises with annual
revenues of more than 20 million yuan from their main
Data on Wednesday showed profits at China's state-owned
firms rose 37.3 percent in the first three months of 2017 from a
($1 = 6.8916 Chinese yuan)
(Reporting by Beijing Monitoring Desk and Ryan Woo and Sue-Lin
Wong; Editing by Sam Holmes and Kim Coghill)