In a continuation of this year’s downward trend, profits of China’s industrial enterprises have taken a 6.7% hit in July compared to the previous year. This marks the seventh consecutive month of decline, painting a picture of ongoing struggle for companies amidst weakening demand and a stumbling post-pandemic recovery in the world’s second-largest economy.
The latest figures from the National Bureau of Statistics reveal a concerning 15.5% year-on-year contraction in earnings over the first seven months of the year, following a troubling 16.8% drop observed in the first half of 2023.
June had witnessed an 8.3% decline in profits, as indicated by the bureau, which releases monthly statistics only occasionally.
Amidst these challenging times, NBS statistician Sun Xiao has highlighted that the pressure on raw material costs within midstream and downstream industries has eased, subsequently leading to an overall improvement in the unit cost of industrial enterprises. Interestingly, July posted the first year-on-year decrease in unit costs since the start of this year.
The impact is evident across the spectrum, with major Chinese manufacturers, including giants like China Aluminum International, grappling with losses in the first half. The engineering firm reported a staggering net loss of 830.6 million yuan ($114.2 million), a stark contrast to the net profit of 123.6 million yuan from the same period last year.
The economic outlook has compelled major banks to downgrade their growth forecasts for the year, falling below the government’s target of approximately 5%. Contributing factors include a worsening property market, sluggish consumer spending, and a noticeable decline in credit growth. Consequently, authorities have responded with measures such as interest rate cuts and assurances of further support.
The industrial landscape has seen state-owned enterprises facing a significant 20.3% plunge in earnings for the first seven months of the year. Meanwhile, foreign firms have registered a 12.4% decline, and private-sector companies have experienced a 10.7% fall, according to the data breakdown.
A closer look at the numbers reveals a stark reality for various sectors. Among the 41 major industrial sectors, 28 have reported profit reductions during this period. The most substantial drop was observed in the ferrous metal smelting and rolling processing industry, which witnessed a staggering 90.5% decline.
With the economy at a critical juncture, the central bank has expressed its commitment to maintaining a “precise and forceful” policy to bolster recovery. The big question remains whether more substantial measures will be introduced to support growth.
Despite these challenges, President Xi Jinping has maintained a stance of resilience. During a forum in South Africa, he asserted that the economy remains robust, and the foundational elements for long-term growth remain steadfast.
It’s important to note that these industrial profit numbers encompass firms with annual revenues of at least 20 million yuan ($2.77 million) from their primary operations.
