China’s Industrial Profits Experience Seventh Consecutive Month of Decline
Profits at China’s industrial firms fell 6.7% in July compared to the same month a year ago, extending this year’s decline to a seventh month as sluggish demand squeezed companies and China’s post-pandemic recovery faltered.
Earnings Drop Continues
According to data released by the National Bureau of Statistics on Sunday, earnings fell 15.5% year-over-year for the first seven months, following a 16.8% drop for the first six months.
Profits decreased by 8.3% in June, according to the bureau, which publishes monthly figures infrequently.
Raw Material Cost Pressure Eases
The pressure on raw material costs in the midstream and downstream industries has abated, and commodity prices are falling. Sun Xiao, a statistician with the National Bureau of Statistics, said in an accompanying statement, “The unit cost of industrial enterprises has improved overall, with unit costs in July posting the first year-over-year decline since the beginning of this year.”
Varied Impact on Sectors
A breakdown of the data revealed that in the first seven months of this year, earnings fell 20.3% for state-owned enterprises, 12.4% for foreign firms, and 10.0% for the private sector. During the period, 28 of 41 main industrial sectors reported a decline in profits, with the ferrous metal smelting and rolling processing industry experiencing the steepest decline (90.5%).
China Aluminum International (2068.HK) reported a net loss of 830.6 million yuan ($114.2 million) for the first half of the year, compared to a net profit of 123.6 million yuan for the same period in the prior year. Major banks have lowered their growth forecasts for the year to below the government’s target of approximately 5% as the recovery falters due to a deteriorating property downturn, sluggish consumer spending, and plummeting credit growth, prompting the authorities to cut interest rates and pledge additional support.
The central bank announced this month that it will maintain a “precise and forceful” policy to support the economic recovery. It remains to be seen if more substantial measures will be taken to stimulate economic expansion. President Xi Jinping stated on Tuesday at a forum in South Africa that the economy was resilient and that the fundamentals for long-term development remained unchanged.
The industrial profit figures include only companies with annual revenues of at least 20 million yuan ($2.77 million) from their primary operations.
Also Read:
