China’s industrial profits continue to grapple with challenges as they mark the seventh straight month of decline. In July, China’s industrial profits dropped by 6.7% compared to the prior year. This prolonged period of decline stems from weakened demand. There is a substantial effect on businesses in the midst of the post-pandemic recovery challenges in the second-largest economy in the world.
For the initial seven months of this year, earnings contracted by 15.5% year-on-year. This decline builds upon the 16.8% decrease observed in the first half of the year.
National Bureau of Statistics
The National Bureau of Statistics disclosed this concerning trend. Additionally, June recorded a notable decline of 8.3% in profits, as detailed in the bureau’s periodic updates.
Sun Xiao, a spokesperson from the National Bureau of Statistics, explained that the drop in commodity prices has been pivotal. It has eased pressure on raw material costs for midstream and downstream industries. This joint improvement led to a notable reduction in the overall unit cost of industrial enterprises. Notably, July was significant as it saw the first year-on-year decrease in unit costs since the year began.
Major Manufacturers Struggle: China Aluminum International’s Losses
Major Chinese manufacturers experienced losses in the first half of the year. For instance, engineering firm China Aluminum International reported a net loss of 830.6 million yuan ($114.2 million). This was a sharp contrast to the net profit of 123.6 million yuan in the same period the previous year.
Prominent banks in the region have revised their growth forecasts for this year. They are projecting figures below the government’s target of approximately 5%.
The revision is because of a few things: the property market is struggling, people are spending less, and credit growth is going down. To help, the authorities are doing things like lowering interest rates and giving more support.
Different Sectors Impact on China’s Industrial Profits
The effects on the Chinese economy vary depending on the sector. The first seven months of this year saw a considerable earnings decline for state-owned companies of 20.3%. According to the available data, private businesses reported a decline of 10.7%, and foreign enterprises saw a decline of 12.4%.
Alarmingly, 28 out of 41 of the key industrial sectors saw a decline in profitability during this time. The ferrous metal smelting and rolling processing sector experienced a staggering 90.5% decline, which was the most notable decline.
Central Bank’s Determination to Rejuvenate China’s Industrial Profits
The central bank is highly committed to an effective recovery strategy in light of the economy’s challenges. But there’s a need for more significant actions to stimulate growth in China.
At a meeting, President Xi Jinping assured everyone that China’s economy is robust despite persistent issues. The key elements that promote long-term growth remain constant.
It’s important to note that the criteria for these industrial profit numbers include businesses having yearly revenues of at least 20 million yuan ($2.77 million) from their core businesses.
Credit: Investing.com
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