Sharp decline in industrial profits
By Wang Yanlin |
August 28, 2012, Tuesday
|
Print Edition
Print Edition
THE profits of Chinese industrial companies declined at their sharpest pace this year in July, reflecting deteriorating conditions and prompting calls 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, the National Bureau of Statistics said yesterday.
In the first seven months, earnings lost 2.7 percent to 2.67 trillion yuan, a sharp drop from last year's 25.4 percent increase.
"China's manufacturers are suffering from higher production costs, which are not compatible with the sluggish sales at both external and internal markets," said Li Maoyu, a Changjiang Securities Co analyst. "The country needs to enhance policy efforts to support struggling companies."
Private business still reported a profit growth of 15.5 percent in the first seven months, the bureau data showed, while earnings of foreign-invested firms and those from Hong Kong, Macau and Taiwan slumped 12.6 percent. State-owned enterprises said their profit fell 12.2 percent.
Of 41 industries tracked, 25 reported profit growth during January-July, led by the electricity generation and supply industry with a 29.3 percent jump from a year earlier.
One sector - oil refining, coke and nuclear fuels - reported an outright loss in the first seven months.
The HSBC Flash Purchasing Managers' Index, which is the earliest indicator of conditions in China's industrial sector and slanted toward private companies, fell to a nine-month low of 47.8 in August from July's final reading of 49.3. It indicated manufacturing activities have shrunk for a 10th month - the longest streak since 2008.
Earlier this month, China also reported economic data for July that was worse than expected, and there were calls from economists for more policy easing - in particular, an immediate cut in the reserve requirement ratio.
"Slowing external demand and insufficient policy supports are two major risks that could further delay the modest growth recovery we expect in the third quarter," said Chang Jian, a Barclays economist.
China's gross domestic product expanded 7.6 percent year on year in the second quarter, the slowest pace in three years.
However, no action has been taken since two interest rate cuts in June and July.
Yin Zhongqing, vice chairman of the economic committee of China's legislative body, said: "Instead of using monetary policy easing, the authorities now incline to take advantage of fiscal policies and focus on economic restructuring and reform deepening."
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, the National Bureau of Statistics said yesterday.
In the first seven months, earnings lost 2.7 percent to 2.67 trillion yuan, a sharp drop from last year's 25.4 percent increase.
"China's manufacturers are suffering from higher production costs, which are not compatible with the sluggish sales at both external and internal markets," said Li Maoyu, a Changjiang Securities Co analyst. "The country needs to enhance policy efforts to support struggling companies."
Private business still reported a profit growth of 15.5 percent in the first seven months, the bureau data showed, while earnings of foreign-invested firms and those from Hong Kong, Macau and Taiwan slumped 12.6 percent. State-owned enterprises said their profit fell 12.2 percent.
Of 41 industries tracked, 25 reported profit growth during January-July, led by the electricity generation and supply industry with a 29.3 percent jump from a year earlier.
One sector - oil refining, coke and nuclear fuels - reported an outright loss in the first seven months.
The HSBC Flash Purchasing Managers' Index, which is the earliest indicator of conditions in China's industrial sector and slanted toward private companies, fell to a nine-month low of 47.8 in August from July's final reading of 49.3. It indicated manufacturing activities have shrunk for a 10th month - the longest streak since 2008.
Earlier this month, China also reported economic data for July that was worse than expected, and there were calls from economists for more policy easing - in particular, an immediate cut in the reserve requirement ratio.
"Slowing external demand and insufficient policy supports are two major risks that could further delay the modest growth recovery we expect in the third quarter," said Chang Jian, a Barclays economist.
China's gross domestic product expanded 7.6 percent year on year in the second quarter, the slowest pace in three years.
However, no action has been taken since two interest rate cuts in June and July.
Yin Zhongqing, vice chairman of the economic committee of China's legislative body, said: "Instead of using monetary policy easing, the authorities now incline to take advantage of fiscal policies and focus on economic restructuring and reform deepening."
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