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(Yicai Global) Aug. 29 -- China’s industrial firms saw profits fall 1.1 percent in the first seven months of this year from a year ago because of Covid-19 outbreaks and extreme weather conditions.
Profits at industrial companies with an annual turnover of at least CNY20 million (USD2.9 million) fell to a collective CNY4.89 trillion (USD707 billion) from the start of January to July 31, data from the National Bureau of Statistics showed today.
During the period, large industrial firms contended with weaker demand, higher raw material costs, disruptions resulting from efforts to contain Covid-19, and curbs on energy use amid record high summer temperatures.
These firms continued to recover, but due to an array of factors, including persistently high costs and a lack of demand in some industries, profits fell, Zhu Hong, a senior NBS statistician, said in a press release.
Some markets had sufficient demand, but the domestic and overseas environments became more complicated and challenging, Zhu noted, so considerable efforts are still needed to support the recovery of the industrial economy.
Industrial profits slipped for the first time since October 2020 because of slower growth of industrial added value and the producer price index as well as smaller operating profit margins, Zheng Houcheng, head of a research institute under Yingda Securities, told Yicai Global.
Companies have benefited from government bailout policies, but their profits have remained under pressure amid the gradual recovery from the pandemic, and costs are still high. For large industrial firms, costs per CNY100 (USD14.46) of operating revenue were CNY84.70 from January to last month, up CNY0.95 (14 US cents) from the same period last year, the data showed.
Profits for equipment manufacturers dropped 5.7 percent between January and July, but the drop was 2.1 percentage points lower than that in the first half thanks to a sustained recovery in industrial and supply chains as well as the consumption boost from a reduction in vehicle purchase tax.
Profits for automakers jumped 78 percent last month from a year earlier, about 30 points higher than that in June, making autos one of China’s fast-growing industries.
But prices of industrial products began to fall and became less effective in supporting income and profit growth at industrial enterprises, Zhu said. Lower prices caused the profit growth of large firms to drop 2.3 points from January to last month from that in the first half, per preliminary estimates.
Prices of industrial products have been growing more slowly month by month this year. The PPI rose 4.2 percent last month from a year ago, 1.9 point slower than in the previous month.
China must efficiently coordinate anti-Covid-19 policies with economic and social development in the future, Zhu stressed, adding that industrial and supply chains must be kept stable and unblocked, effective investment must be raised, and greater efforts will be needed to help companies overcome difficulties.
Editor: Tom Litting