China’s industrial profits grow at fastest pace since mid-2018

27-Aug-2020 Intellasia | Reuters | 10:08 AM Print This Post

Profits at China’s industrial firms grew for a third straight month and at the fastest pace since June 2018, marking a bright spot in the economy as the manufacturing sector slowly recovers from its coronavirus slump.

Profits at China’s industrial firms grew 19.6 percent on-year to 589.5 billion yuan ($85.58 billion), the statistics bureau said on Thursday, following an 11.5 percent increase seen in June, the National Bureau of Statistics (NBS) data showed on Thursday.

China’s recovery had been gaining momentum after the pandemic paralysed huge swathes of the economy as pent-up demand, government stimulus and surprisingly resilient exports revived activity.

However, some signs of weakness have emerged in July, with industrial output growing slower than expected. Some analysts said flood and torrential rain have dampened activity and demand for electricity.

Factories’ profits also face risks from increasingly tense US-China relationship ahead of the US presidential elections in November, which could impact overseas orders and confidence from investors and consumers.

For January-July, industrial firms’ profits fell 8.1 percent on an annual basis to 3.1 trillion yuan, improving from a 12.8 percent slump in the first six months.

Automobiles and electronics industries notched up significant recoveries in profits in July, seeing growth rates of 125.5 percent and 38.6 percent respectively, according to Zhu Hong, an official at the statistics bureau.

Despite the acceleration in profits in July, accumulated profit declines in the mining and raw materials industries remain large, company cash flow pressures are high, and a “complex and severe” environment at home and abroad means that future profit growth has a degree of uncertainty, said Zhu.

Earnings at China’s state-owned industrial firms were down 23.5 percent on an annual basis for the first seven months of the year, versus a 28.5 percent decline in the first half of the year, the statistics bureau data showed.

Liabilities at industrial firms rose 6.5 percent on-year at end-July, up from a 6.4 percent growth as of end-June.

Private sector profits fell 5.3 percent in January-July, narrowing from January-June’s 8.4 percent fall.

The industrial profit data covers large firms with annual revenue over 20 million yuan ($2.90 million) from their main operations.


Category: China

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