Title: China’s Industrial Profits Continue to Decline, Raising Concerns about Post-Pandemic Recovery
In a worrying trend, China’s industrial profits have taken a significant hit for the seventh consecutive month, with a decline of 6.7% recorded in July. This marks a continuation of the downward spiral that has plagued the world’s second-largest economy, intensifying concerns about its post-pandemic recovery.
The data, released by the National Bureau of Statistics, reveals that profits for the first seven months of this year were down 15.5% compared to the same period in 2020. These figures underscore the immense challenges faced by companies as they grapple with weak demand and a faltering economic rebound.
While the decline in commodity prices has provided some respite by easing the pressure on raw material costs for industrial enterprises, major players in the Chinese manufacturing sector have not been immune to the downturn. Engineering firm China Aluminum International and others reported losses in the first half of the year, highlighting the gravity of the situation.
Adding to the growing concerns, major banks have downgraded their growth forecasts for the year, citing a worsening property slump, weak consumer spending, and tumbling credit growth. These factors, combined with the alarming profit decline, have prompted a sense of urgency for policymakers to implement effective measures to revive the economy.
The effect of these challenges is evident across the board, with state-owned enterprises witnessing a staggering 20.3% drop in earnings during the first seven months of the year. Foreign firms and private-sector companies have also experienced declines, indicating that the impact is widespread.
Delving into specific sectors, a concerning trend emerges. Out of the 41 major industrial sectors analyzed, 28 reported a decline in profits. The ferrous metal smelting and rolling processing industry suffered the most significant blow, with profits plummeting by a staggering 90.5%. This paints a vivid picture of the severity of the situation faced by industrial enterprises across the country.
In response to these concerning developments, the central bank has pledged to implement “precise and forceful” policies to support economic recovery. However, the effectiveness of these measures remains uncertain, leaving room for skepticism.
Despite the challenges, President Xi Jinping remains steadfast in his belief that the Chinese economy is resilient, emphasizing that the fundamentals for long-term growth remain unchanged. As discussions surrounding the recovery continue, it is evident that urgent and strategic action is required to stabilize China’s industrial sector and pave the way for sustainable growth.
It is worth noting that the industrial profits data covers firms with annual revenues of at least 20 million yuan ($2.77 million) from their primary operations, providing a broad understanding of the overall health of China’s industrial landscape.
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