Employees work on an electronics production line at a factory in Longyan, Fujian Province, China, February 2, 2023.
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Profits at Chinese industrial firms slumped in the first four months of 2023, official data showed on Saturday, as firms continued to struggle with margin pressure and weak demand amid a faltering economic recovery.
According to the National Bureau of Statistics (NBS), profits fell 20.6% year-on-year between January and April, compared with a 21.4% drop in the previous three months.
In April alone, industrial firms’ profits fell 18.2% year-on-year, according to the National Bureau of Statistics, which releases monthly figures only sporadically. Profits fell 19.2% in March.
“Overall, today’s data shows that industrial companies, especially private and joint-stock companies, continue to be affected by base effects, short-term pressure on economic recovery, and downturns in PPI (producer price index) and other unfavorable factors. Price), “JLL Chief Executive Economist Bruce Pang said.
Chinese companies are struggling with weak domestic demand and softer demand in the country’s main export market. Producer deflation deepened in April, with the producer price index (PPI) falling at the fastest rate since May 2020.
Lenovo, the world’s largest PC maker, said this week that revenue and profit fell sharply in the January-March quarter as global demand for personal computers (PCs) continued to slump, and it had cut 8% to 9% of its workforce to cut costs .
Producers of steel and other industrial metals were also hurt. Prices for steel rebar, used in construction, hit their lowest level in three years this week, with only a third of the country’s steel mills now profitable, according to consultancy Mysteel.
“There is still some pressure in May due to the spread between purchase and sale prices, and steel prices have retreated as demand recovery has been slower than expected,” said Baosteel, the Chinese unit of the world’s largest steelmaker. Baowu Iron and Steel Group said on the investor interaction platform on May 22.
According to a breakdown of the data, profits of foreign companies fell 16.2 percent from a year earlier in the January-April period, while profits of private sector firms fell 22.5 percent.
During this period, the profits of 27 of the 41 major industrial industries declined, among which the ferrous metal smelting and rolling industry saw the largest decline of 99.4%.
Sun Xiao, a statistician from the National Bureau of Statistics, said that in the next stage, my country will focus on restoring and expanding demand, further improving the level of production and sales, and boosting business confidence.
The grim profit figures came after a slew of April economic indicators, including industrial output, retail sales and property investment, suggested the recovery in the world’s second-largest economy was losing steam.
Beijing has set a modest growth target of around 5% for this year. Signs of a quick recovery after China’s abrupt end to coronavirus restrictions late last year prompted many institutions, including the World Bank, to upgrade their growth forecasts for China’s economy in 2023.
Still, some investment banks have recently lowered their forecasts for China’s economic growth in 2023 after disappointing April data, with Nomura lowering its forecast to 5.5% from 5.9% previously and Barclays lowering its view to 5.6% from 5.6%. revised down to 5.3%.
Earlier this month, Premier Li Qiang said that more targeted measures would be taken to expand domestic demand and stabilize external demand in order to promote a sustained economic recovery.
The industrial profit data covers companies with annual revenues from their main business of at least 20 million yuan ($2.89 million).