China’s industrial profit growth has slowed for the fourth straight month in June. Chinese industrial firms’ profits totaled at CNY797.8bn ($122.3bn) in June 2020, according to National Bureau of Statistics data. Although June posted a 20pc rise from the prior year, growth has decelerated from a 36.4pc increase in May 2021.
Profit recovery in various industries was uneven during the first half of 2020. Record high raw material prices have narrowed the profit margins of numerous factories and industries. Meanwhile, stricter policies to control steel output impacted steelmakers’ recovery. China’s industrial profit data represents large industrial firms with annual revenues of over CNY20mn.
During January-June 2021, industrial firms’ profits jumped by 66.9pc from the prior year. In 2020, the profits plunged for many factories while a few faced losses due to the pandemic.
In the first half of 2021, the Chinese economy showed continuous recovery from the impact of COVID-19 seen the prior year, however, production cuts, high raw material prices, shortage of containers and logistic challenges impacted the profit growths. Private and small to medium scale businesses are facing even slow recovery than large and government-owned businesses.
Profits in January-June were still higher by 45.5pc from the first half of 2019 indicating overall high industrial growth in China.
China is considering relevant changes in policies as well as taxes to curb the unreasonable rise in commodity prices. Elevated commodity prices cause inflation and despite various efforts, commodity prices may stay high in the second half of 2021, believes industry experts.