October 2, 2023
Profits for Chinese industrial companies continued to decrease by double digits for the first eight months, although the rate of declines slowed marginally as a flurry of policy support measures began to stabilize certain aspects of the sputtering economy.
In keeping with expectations, the 11.7% year-over-year decline in profits decreased from a 15.5% contraction for the first seven months. This could indicate that certain businesses are starting to experience a slight comeback.
This was supported by August earnings, which unexpectedly increased by 17.2% from a year earlier, according to data released on Wednesday by the National Bureau of Statistics (NBS). In July, profits decreased by 6.7%.
According to Bruce Pang, chief economist at Jones Lang Lasalle, “this data reflected that domestic demand has stabilized and the demand and supply side has seen balanced recovery.”
In a remark that was included, NBS statistician Yu Weining stated that last month’s earnings were supported by “a series of policies to promote macroeconomic recovery.”
Thirty of the 41 major industrial sectors had an increase in profits during this time period, with losses in the manufacture of raw materials industry notably decreasing due to rising commodity prices and recovering demand. Out of the 41 industries, 28 saw a decline in earnings between January and July.
Recent data have indicated hints of stabilization with stronger-than-expected bank lending, industrial output, and retail sales growth for August. Beijing is stepping up policy support for its struggling economy following a brief post-COVID resurgence.
Even still, the crisis-affected property sector, which makes up one-fourth of the second-largest economy in the world, continues to be a drag on growth.
China’s new home prices dropped last month at their quickest rate in the previous 10 months. Some large cities, including Beijing, are reportedly experiencing an increase in new home sales as a result of relaxed borrowing regulations, although concerns persist that the trend may only last temporarily.
The general demand forecast for businesses and the economy may be harmed by low confidence in the real estate sector, which is cause for concern.
The NBS data breakdown showed that there was still some work to be done before there was a significant turnaround in overall earnings growth.
The first eight months of the year saw a 16.5% decline in state-owned company profits, an 11.1% decline for foreign enterprises, and a 4.6% decline for private sector companies, according to the data.
Industrial profit figures apply to companies with core operations that generate at least 20 million yuan ($2.75 million) in yearly revenue.
Source: Reuters
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