China Headlines: Silver lining in slowing Chinese economy

As industrial profit decline narrows, the high-tech sector shines and the "Made in China" strategy gains momentum, many are upbeat that the clouds casting shadows on the Chinese economy are beginning to part.

For the first two months of the year, industrial profits declined 4.2 percent year on year, according to the National Bureau of Statistics (NBS). HSBC's preliminary purchasing managers' index (PMI) showed that manufacturing activity in March had fallen to an 11-month low of 49.2.

The economic growth rate registered in 2014 was 7.4 percent, its lowest level in 24 years. The government responded by setting the annual growth target for 2015 to "around 7 percent."

However, every cloud has a silver lining. In the case of the economy, the industrial profit decline has narrowed and the performance of high-tech manufacturers is healthy.

INDUSTRIAL UPGRADE

Profits of Chinese industrial businesses hit 745.24 billion yuan (121.5 billion U.S. dollars) in the first two months, down 4.2 percent, compared to an 8 percent decrease in December 2014.

The calculations include companies with annual revenue exceeding 20 million yuan.

NBS statistician He Ping said the profit decrease was due to lower prices, rising costs and significant profit decline in the oil and coal industries.

Despite the decrease, the industrial sector continued to modernize, with better performance in high-tech manufacturing, equipment and machinery manufacturing.

During the first two months of 2015, 30 of the 41 sectors surveyed reported year on year profit increases, with high-tech manufacturing profits surging 48.4 percent year on year.

Raw material production saw profits slow as the scaling back of the coal industry continues. Profits from oil drilling and coal mining plunged 74.9 percent and 62.6 percent, respectively.

In 2014, although China's industrial output grew 8.3 percent, down from 9.7 percent growth seen in 2013, the value-added of the high-tech manufacturing sector rose by 12.3 percent, four percentage points higher than industrial enterprises.

Meanwhile, research and development expenditure increased 12.4 percent year on year to 1.33 trillion yuan, accounting for 2.09 percent of gross domestic product (GDP), a record high.

The high-tech industry accounted for 10.6 percent of the country's overall industrial value-added output in 2014.

The fast expansion of the high-tech and modern service industries shows the economy is advancing to the "middle and high end," said Xie Hongguang, NBS deputy chief.

China should work toward greater investment in "soft infrastructure," like innovation, to climb the global value chain, said Zhang Monan, an expert with the China Center for International Economic Exchanges.

Innovation is one of the government's focuses, with promises made to boost the implementation of the "Made in China 2025" strategy, which will upgrade the manufacturing sector and aid the achievement of a medium-high level of economic growth.

MADE IN CHINA 2025

The Made in China 2025 will focus on the upgrading the manufacturing sector, Su Bo, vice minister of industry and information technology, said Friday.

Ten sectors -- new information technology, high-end numerically-controlled machine tool and robot, aerospace equipment, ocean engineering equipment and ships with high technology, advanced railway traffic equipments, energy saving and new energy vehicles, power equipment, new material, biological medicine and high-performance medical devices as well as agricultural production machinery --- will be prioritized.

The strategy aims to improve manufacturing innovation abilities, integrate informatization and industrialization, strengthen industrial base ability, thoroughly enforce green manufacturing and promote manufacturing internationalization level, among others.

It will not only push forward the transformation and upgrading of traditional manufacturing industry, but also push development, according to Su.

To this end, China will focus on five major projects, including the establishment of a manufacturing innovation center.

Made in China 2025 is the first 10-year action plan designed to boost new strategies to achieve stable growth, said Su.

Accelerated industrialization is supported by the manufacturing sector, according to a statement released after an executive meeting of the State Council, presided over by Premier Li Keqiang.

The Made in China 2025 strategy was proposed in this year's government work report. It said that the strategy had the potential to empower the manufacturing sector, while boosting "innovated in China," which will help to attain the goal of achieving medium-high-level economic growth. Endi