industrial profits

Profit growth at China's industrial firms continued to recover in August as the decline in profits narrowed, with auto and power industries doubling their profits in the month.

Profits of major industrial enterprises above a designated size in China fell 2.1 percent year-on-year in the first eight months of this year, but showed some positive signs in August, according to figures released by the Bureau of Statistics (NBS) on Tuesday. 

The decline of profits narrowed in August from July, with improved structure among industries in middle and downstream industries, said Zhu Hong, a senior NBS statistician.

The accumulated year-on-year profit growth decline was largely attributed to a high base effect last year and a decline of profits in the mining industry, due to weaker commodity prices, experts said.

Profit growth in the mining sector fell by 88.1 percent in January-August, 17.2 percentage points slower than that of the first seven months, NBS data showed.

There have been sustained structural improvements which are obvious, as profit growth in more industrial lines has improved in August from July, Tian Yun, an independent economist told the Global Times on Tuesday.

The NBS did not report standalone figures for August but several industries led by manufacturing and power recorded improved profits. The decline of profits in the equipment manufacturing industry narrowed for a fourth consecutive month, and the profit of power industry continued to pick up, Zhu noted.

More than 60 percent, mostly middle and downstream industries have seen their profit growth accelerated from previous months, or the decline in profit growth has narrowed, or returned to growth in August, the NBS said. 

In particular the production and sales of the automobile manufacturing industry increased 1.2 times year-on-year in August, the highest growth rate in a year partly due to the government’s tax exemption policies.

Profits in the power industry were up 1.58 times year-on-year in August, driven by high demand for electricity due to hot weather.
In addition, as the effects of pro-consumption policies continue to take effect, profits in consumer goods industries have picked up. For example, the profits of tea and beverage industries increased by 59.8 percent in August.

“In August more industries have seen their profit growth improve and the distribution among industries is more even due to an overall recovery in consumption in August, which is expected to further boost employment,” Tian said.

If the marginal improvement continues it will bring the year-on-year profit growth from negative to positive, help expand job recruiting and consolidate economic recovery, Tian said.

China’s main economic indicators for August recorded better-than-expected growth from July, on track for a steady recovery despite strong headwinds linked to summer heat waves and sporadic COVID-19 flare-ups.

China’s retail sales grew by 5.4 percent in August from a year earlier, up from a growth of 2.7 percent in July. 

Policymakers will now seek to accelerate the implementation of policies to expand market demand, and promote a sustainable recovery of the manufacturing sector, while prevent the external risks such as US interests rate hikes, experts said.

A slowdown in global demand, rising volatility at the foreign exchange market may affect China’s foreign trade and stress the industrial sector growth, Zhou Maohua, a macroeconomic analyst at Everbright Bank, told the Global Times on Tuesday.

However, it should be noted that domestic demand is now catching up with the pace of supply, and the industrial ecosystem has largely improved, while industrial and manufacturing sectors are actively responding to the changing global environment, which reflects the Chinese economy’s resilience, Zhou noted.