Chinese industrial profits are declining after there was a gain during May, which fueled concerns about manufacturing industry facing a slowdown due to the current trade war, impacting economic growth.
Chinese profits in the industrial sector have been falling since 2018 due to the China-US trade war as many industrial companies have put off their business decisions & are scaling down manufacturing investment.
Q2 economic growth has fallen to 30-year lows.
Industrial profits have also fallen 3.1% compared to last year, to around $87.5 billion, as per data from NBS. This followed a gain of 1.1% seen in May. During the first 6 months, profits of around 2.98 trillion Yuan were earned by industrial firms, which were a 2.4% fall compared to last year. Falling profits in steel, auto and oil processing sectors have driven this fall in profits, stated Zhu Hong from NBS.
Producer price-related inflation used to measure industrial profitability reduced to zero compared to last year, fueling worries regarding deflation. This could push authorities to dole out aggressive stimulus moves.
Chinese and the US negotiators will come together again for talks, the first since President Xi Jinping and Donald Trump decided to revive their negotiations, back in June, in an attempt to end current US-China trade war. These 2 governments have imposed tariffs worth billions on imports from each other, messing up supply chains globally and impacting financial markets.
A full month elapsed since imposition of tariffs on Chinese imports worth $200 billion during June, which was imposed after talks failed. Imports and exports both fell.
Saturday’s data suggests that machinery and construction material industries provided the profits which cushioned the current overall profits fall during the first 6 months. This was probably as a result of increased government spending, which supported metal producers, miners, and railway equipment producers. However, electronic equipment and telecoms manufacturers declined by 7.9% during the first 6 months. They were more vulnerable compared to others.
Chinese public industrial companies saw their profits decline by 8.7% when taken on a yearly basis.
Liabilities grew by 5.6% YoY during end-May, compared to an around 5.3% rise during end-May. The private sector’s profits rose by 6%, slower than the 6.6% seen during the first 5 months.