Industrial profits fall on weak GDP
Print Edition
PROFITS of China’s industrial companies fell further in July amid increased signs that the world’s second-biggest economy continued to be weak.
Net earnings of manufacturing companies lost 2.9 percent from a year earlier to 471.5 billion yuan (US$73.82 billion) last month, worsening from the 0.3-percent drop in June, according to the National Bureau of Statistics yesterday.
It was the second consecutive month for net profits to decline after a brief growth of 0.6 percent in May.
In the first seven months, their revenue was 3.32 trillion yuan, down 1 percent annually and compared with the decrease of 0.7 percent in the first half of the year.
He Ping, a researcher at the bureau, blamed the decrease in July to insufficient domestic demand as both sales growth and factory-gate prices continued to weaken.
“China’s industrial production slowed significantly last month, while other core indicators all pointed to a troubled manufacturing sector,” He said.
China’s industrial output grew 6 percent in July, down from 6.8 percent in June, and hit its slowest pace in four months, earlier data showed.
The Producer Price Index, a factory-gate measurement of inflation, shed 5.4 percent in July, compared with the fall of 4.8 percent in June. It was also the 41st straight month of decline.
Meanwhile, the Caixin Flash China General Manufacturing Purchasing Managers’ Index, the earliest available indicator of China’s industrial sector that was renamed from the HSBC PMI, fell to 47.1 in August — a 77-month low — and down further from the final reading of 47.8 in July. The reading has been below the demarcation line of 50 for the sixth straight month and indicated continued shrinking of factory activities.
Zhu Haibin, chief economist for China at JP Morgan, said the unexpected plunge in economic activity according to the data may deepen concerns about China’s growth.
“Looking into the future, further fiscal support and continuous monetary easing will lead to pick-up in infrastructure investment, which will support domestic demand by partially offsetting the weakness in manufacturing and real estate investment.”
China’s economic data for July, including trade, industrial production, retail sales and fixed-asset investment, all weakened.
In a bid to shore up the economy and stabilize the stock market, the People’s Bank of China unveiled cuts in both interest rates and bank reserve requirement ratio on Tuesday. It was the fifth interest rate cut since November last year.
He of the National Bureau of Statistics said the recent interest rate cut will help companies to lower costs on capital, and it will in turn lift profit margin for manufacturers.
The government also brought in other measures like quicker implementation of investment projects such as railway and subway in many areas to support the economy.
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