(Yicai Global) Aug. 27 -- The pace of rising profits at China’s big industrial firms is expected to continue decelerating this month, according to the director of Yingda Securities' research institute.

August may be marked by profit stagnation, even though perhaps more moderate than before, because of new Covid-19 outbreaks, floods, and the government's overhaul of high polluting projects, Zheng Chenghou told Yicai Global. 

Last month, profits at industrial firms with at least CNY20 million (USD3.1 million) in annual turnover rose 16.4 percent from a year ago to CNY703.7 billion (USD108.6 billion), according to data the National Bureau of Statistics released today. In June, the figure had climbed 20 percent.

Businesses face challenges from new Covid-19 outbreaks and flooding in China since last month, while the pandemic situation overseas is continually changing, Zhu Hong, a senior statistician at the NBS, said at a press conference to announce July’s data.

Another issue is that commodity prices are rising. The profitability of micro and small firms that work closer to clients downstream or midstream in the supply chain is being squeezed as raw material prices surge, Zhu said.

Some sectors did better than others last month. More than 70 percent reported profits that exceeded levels reported before the pandemic. Some 25 of 41 major sectors boosted their profits in July from a year ago. Energy was one of them.

Oil and gas exploitation, oil processing, as well as coal and chemicals companies recorded a doubling of profits. Meanwhile, the pharmaceutical sector benefited from strong demand for Covid-19 vaccines and pandemic control products as profits rose more than two times.

The government supported firms with tax and fee cuts, so unit costs at industrial firms kept falling in July. Operating income margins widened by 0.19 percentage point to 6.94 percent on average from a year earlier, according to Zhu.

In the first seven months of this year, industrial profits jumped 57.3 percent to CNY4.92 trillion (USD759.3 billion), NBS data showed.

Editors: Zhang Yushuo, Emmi Laine, Xiao Yi