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Industrial sector suffers profits blow
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THE profits of China’s industrial companies fell more than expected in August, dropping 8.8 percent from a year earlier to 448.1 billion yuan (US$70.6 billion).
That compared with the loss of 2.9 percent in July and June’s 0.3 percent, according to the National Bureau of Statistics yesterday.
There was brief expansion of 0.6 percent in May.
In the first eight months, manufacturing companies’ profits totaled 3.76 trillion yuan, down 1.9 percent year on year. The January-July period saw a decrease of 1 percent.
He Ping, a bureau researcher, said production costs rising faster than sales, insufficient demand leading to low prices, and the movement of exchange rates were behind the deceleration.
“China’s industrial profits deteriorated significantly last month,” He said. “However, some other indicators pointed to a stabilizing manufacturing sector, painting a mixed picture that added to the uncertainties of the economy.”
China’s economic performance showed signs of stabilization in August with key activity data, including industrial production and retail sales, growing at a slightly faster pace after months of slowdown. Industrial production expanded 6.1 percent in August, 0.1 percentage points more than in July.
However, other indicators showed more weakness ahead. The Caixin Flash China General Manufacturing Purchasing Managers’ Index, the earliest available indicator of China’s industrial sector with a focus on private and export-oriented firms, retreated to 47 in September, which was a 78-month low. August’s final reading was 47.3. The reading has been below the demarcation line of 50 for the seventh month.
Meanwhile, the Producer Price Index, a factory-gate measurement of inflation, fell 5.9 percent in August, compared with a contraction of 5.4 percent in July and making 42 months of decline.
China’s gross domestic product grew 7 percent in the second quarter, in line with the government target.
The Asian Development Bank last week lowered its forecast of China’s 2015 economic growth rate to 6.8 percent from the previous 7.2 percent in March.
But the bank said China’s exports and consumption will pick up in the coming months to offset the economic slowdown in the third quarter.
In the first eight months, foreign-funded enterprises and those from Hong Kong, Macau and Taiwan performed the best with profits growing 0.7 percent to 931.3 billion yuan.
State-owned industrial enterprises turned in 756.4 billion yuan in profits, a fall of 24.7 percent from a year ago.
Of 41 industrial sectors, profits in 31 rose and 10 fell.
Industries including food processing, refineries and chemicals reported a better performance compared to others.
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