China's industrial profits plunge for seventh month; weak demand blamed
What's the story
China's industrial profits fell 6.7% in July compared to the previous year, marking the seventh consecutive month of declining earnings. Data from the National Bureau of Statistics showed a 15.5% year-on-year contraction for the first seven months, following a 16.8% drop in the first half of the year. The slump affected 28 of 41 major industrial sectors, with the ferrous metal smelting and rolling processing industry experiencing the steepest decline at 90.5%.
Details
Weak demand, low prices hamper post-pandemic recovery
The ongoing decrease in industrial profits can be attributed to weak demand, low commodity prices, and a faltering post-pandemic recovery in the world's second-largest economy. In response, the Chinese government has cut interest rates and promised further support. However, it remains uncertain whether more significant measures will be implemented to boost growth, as major banks have downgraded their growth forecasts for the year to below the government's target of about 5%.
What Next?
Diverse sectors suffer from economic downturn
Various types of companies in China have been affected by the decline in industrial profits. State-owned enterprises saw earnings tumble 20.3% in the first seven months of this year, while foreign firms posted a 12.4% decline and private-sector companies recorded a 10.7% fall. This data breakdown highlights the widespread impact of the economic downturn on different sectors and ownership structures within China's industrial landscape.
Insights
President Xi confident in China's economic resilience
Despite these challenges, President Xi Jinping recently expressed confidence in China's economic resilience and long-term growth potential at a forum in South Africa. As the Chinese government continues to implement measures to support recovery, it remains to be seen how effective these efforts will be in reversing the current downward trend in industrial profits and overall economic growth.