Factories’ profits growth took a dip last month with raw material costs and weaker consumer demand taking the edge off the country’s post-pandemic recovery charge
China’s industrial operators saw earnings slide off the pace in April with high commodity prices and a slower consumer goods sector holding back manufacturing.
Profits at China’s industrial firms rose 57% year-on-year in April to 768.63 billion yuan ($120.22 billion), down from 92.3% in March, data from the National Bureau of Statistics (NBS) showed on Thursday.
For the January-April period, industrial firms’ profits grew 106% from the same period a year earlier to 2.59 trillion yuan, bolstered by a virus-related plunge in activity early last year.
Also on AF: AF TV: Beijing casts its gaze further afield in search of gas
“The improvement of corporate performance is still uneven,” said NBS official Zhu Hong in a statement accompanying the data.
“The profitability of some consumer goods industries has not yet recovered to pre-epidemic levels; coupled with the high prices of bulk commodities, this has increased the pressure on the production and operation of midstream and downstream industries.”
Chemical products and metals processing firms recorded some of the highest year-on-year profit increases over the first four months, according to NBS data, recovering from the Covid-19-induced slump in economic activity in the same period last year.
Profits surged 484% over January-April in the non-ferrous metals smelting and pressing industry. Synthetic fibre manufacturing posted a 650.2% profit increase.
METAL PRICES
Fast profit growth for metals processing has been spurred by higher metal prices, said Iris Pang, chief economist for Greater China at ING.
“But this good time may not last as the government is clamping down on high commodity prices,” she said.
China’s government watchdogs warned industrial metals companies to maintain “normal market order” during talks on significant gains in metals prices this year, China’s top economic planner said on Monday.
Weaker garment and textile manufacturing profits reflect a still gradual global economic recovery amid uncertainties about Covid cases in Asia, said Pang.
China’s economy posted record growth in the first quarter as it emerged from the pandemic although analysts expect the brisk expansion to moderate later this year.
INSECURE FOUNDATIONS
Officials warn the foundations for economic recovery are not yet secure amid emerging problems, including pressures on firms caused by higher raw material costs as international commodity prices rise.
From the start of the year through mid-May, prices for China’s steel rebar, hot-rolled steel coil and copper – vital for the construction of machinery, buildings, appliances and vehicles – surged more than 30%.
Exports accelerated in April, as a brisk US recovery and stalled factory production in virus-hit countries including India boosted overseas orders from China.
However, growth in factory activity and output slowed in April, with companies facing challenges such as chip and container shortages, problems in international logistics and rising freight rates.
- Reporting by Reuters
Read more:
Shanghai’s mission to be Asia’s New York and Silicon Valley all in one
US and China trade reps have “candid, constructive” talks
