China’s industrial profits tumble 18% in April as demand sputters
Workers work on an electronics production line on February 2, 2023, at a factory in Longyan, Fujian province, China.
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Official data showed on Saturday, profits at China’s industrial companies fell in the first four months of 2023, as companies continued to grapple with margin pressures and weak demand amid weak demand. economic recovery is stalling.
Profits fell 20.6% in January-April from a year earlier, compared with a 21.4% decline in the first three months of the year, according to data from the National Bureau of Statistics (NBS).
In April alone, industrial companies posted an 18.2% drop in profits year-on-year, according to NBS, which only occasionally releases monthly figures. Profits fell 19.2% in March.
“Overall, today’s data shows that industrial firms, particularly private and equity firms, continue to be affected by a combination of adverse factors such as basis, near-term economic recovery pressure and downtrend of PPI (manufacturer Bruce Pang, chief economist at Jones Lang Lasalle, said.
Chinese companies are struggling with both weak domestic demand and weak demand in the country’s main export markets. Producer deflation deepened in April, with the producer price index (PPI) falling at its fastest rate since May 2020.
Lenovo, the world’s largest PC maker, said this week that quarterly revenue and profit fell from January to March, and it was cutting 8% to 9% of its workforce to reduce costs. as global demand for personal computers (PCs) continues to decline.
Producers of steel and other industrial metals are also being affected. Prices of reinforcing bars used in construction hit a three-year low this week, and only a third of the country’s factories are now operating at a profit, according to consulting firm Mysteel.
“There is still some pressure in May due to the spread between bid and ask prices, with steel prices falling for the month as demand recovers more slowly than expected,” said Baosteel, a subsidiary of the world’s largest steelmaker. world-China Baowu Steel Group, said in an investor interaction platform on May 22.
Foreign companies saw their profits fall 16.2% in January-April from a year earlier, while private sector firms recorded a 22.0% drop, 5%, according to data analysis.
Profits fell for 27 of 41 major industrial sectors during the period, with ferrous metallurgy and rolling reporting the biggest decline at 99.4%.
In the next phase, China will focus on recovering and expanding demand, further improving production and marketing levels and boosting business confidence, said NBS statistician Sun Xiao. .
The dismal earnings numbers came after a series of April economic indicators, including industrial output, retail sales and real estate investment, showed a recovery in the second-largest economy. two worlds are losing momentum.
Beijing has set a modest growth target of around 5% this year. Signs of a quick recovery after the country abruptly ended Covid containment measures late last year prompted many institutions, including the World Bank, to raise China’s growth estimates for 2023. .
However, a number of investment banks recently downgraded their 2023 China growth forecasts after disappointing April numbers, with Nomura reducing its forecasts to 5.5% from 5.9% previously and Barclays adjusted its view to 5.3% from 5.6%.
Earlier this month, Premier Li Qiang announced more targeted measures to expand domestic demand and stabilize external demand in an effort to promote a sustainable economic recovery.
The industrial profit number includes companies with an annual revenue of at least 20 million yuan ($2.89 million) from their main operations.