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Industrial profit falls 5.4% in July, renewing call for policy easing
By Wang Yanlin |
August 27, 2012, Monday
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Online Edition
Online Edition
PROFIT of Chinese industrial companies declined at a faster pace in July, reflecting their deteriorating operational conditions and a need for further policy easing.
Net earnings among Chinese manufacturers fell 5.4 percent from a year earlier to 366.8 billion yuan (US$58.2 billion) last month, the worst this year compared with June's cut of 1.7 percent, the National Bureau of Statistics said this morning.
In the first seven months, the earnings lost 2.7 percent to 2.67 trillion yuan, a sharp drop from last year's increase of 25.4 percent.
"China's manufacturers are suffering from higher production costs, which are incompatible with sluggish sales in both external and internal markets," said Li Maoyu, an analyst at Changjiang Securities Co. "The country needs to enhance policy efforts to support struggling industrial companies."
The HSBC Flash Purchasing Managers' Index, the earliest monthly indicator of China's industrial activity, fell to a nine-month low of 47.8 in August from July's final reading of 49.3, declining for 10 months on end -- the longest streak since 2008.
Also, China reported worse-than-expected economic data for July early this month, which prompted the call for more policy easing and an immediate cut in reserve requirement ratio to stabilize the economy.
However, the authorities seemed cautious for new moves after making two surprise interest rate cuts in June and July.
Yin Zhongqing, vice chairman of the Economic Committee of the National People's Congress, said there is a debate over the policy mix among the decision makers.
"Instead of easing monetary policy, the authorities are more inclined to take advantage of fiscal policies and concentrate on economic restructuring and reform deepening," Yin said.
Last week, a batch of cities unveiled investment plans for the following years with total value exceeding 7 trillion yuan, indicating a new round of investment boom to bolster the economy.
The private sector reported a 15.5 percent profit increase in the first seven months, the bureau's data showed, while earnings of foreign-owned firms and those funded by Hong Kong, Macau and Taiwan slumped 12.6 percent. State-owned enterprises posted a profit drop of 12.2 percent.
Net earnings among Chinese manufacturers fell 5.4 percent from a year earlier to 366.8 billion yuan (US$58.2 billion) last month, the worst this year compared with June's cut of 1.7 percent, the National Bureau of Statistics said this morning.
In the first seven months, the earnings lost 2.7 percent to 2.67 trillion yuan, a sharp drop from last year's increase of 25.4 percent.
"China's manufacturers are suffering from higher production costs, which are incompatible with sluggish sales in both external and internal markets," said Li Maoyu, an analyst at Changjiang Securities Co. "The country needs to enhance policy efforts to support struggling industrial companies."
The HSBC Flash Purchasing Managers' Index, the earliest monthly indicator of China's industrial activity, fell to a nine-month low of 47.8 in August from July's final reading of 49.3, declining for 10 months on end -- the longest streak since 2008.
Also, China reported worse-than-expected economic data for July early this month, which prompted the call for more policy easing and an immediate cut in reserve requirement ratio to stabilize the economy.
However, the authorities seemed cautious for new moves after making two surprise interest rate cuts in June and July.
Yin Zhongqing, vice chairman of the Economic Committee of the National People's Congress, said there is a debate over the policy mix among the decision makers.
"Instead of easing monetary policy, the authorities are more inclined to take advantage of fiscal policies and concentrate on economic restructuring and reform deepening," Yin said.
Last week, a batch of cities unveiled investment plans for the following years with total value exceeding 7 trillion yuan, indicating a new round of investment boom to bolster the economy.
The private sector reported a 15.5 percent profit increase in the first seven months, the bureau's data showed, while earnings of foreign-owned firms and those funded by Hong Kong, Macau and Taiwan slumped 12.6 percent. State-owned enterprises posted a profit drop of 12.2 percent.
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