(Yicai) Aug. 27 — China’s industrial profits are gradually bouncing back from the impact of earlier China-US trade frictions as government measures to stabilize economic growth take hold, with the drop in profits narrowing for the second month running in July, according to the latest official figures.
Profits at Chinese industrial enterprises above a designated size, which refers to those with an annual revenue above CNY20 million (USD2.8 million), dipped 1.5 percent in July from a year earlier, according to data released today by the National Bureau of Statistics. This is a contraction of 2.8 percentage points from the 4.3 percent drop in June and a big improvement on May’s 9.1 percent plunge amid China-US trade tensions.
In the first seven months, industrial profits slumped 1.7 percent from a year earlier to CNY4 trillion (USD559 billion), while revenue climbed 2.3 percent to CNY78.1 trillion (USD10.9 trillion), the NBS said.
A series of policies aimed at stabilizing prices were rolled out in July, helping restore profitability, said NBS statistician Yu Weining. Large firms in the manufacturing sector were the biggest contributors to the recovery in industrial profits, with their profits soaring 6.8 percent year on year, a widening of 5.4 percentage points from June.
The push to strengthen China’s chipmaking capacity gave the semiconductor sector a big lift. Profits at integrated circuit makers jumped 176 percent in July from the year before, while profits at semiconductor equipment manufacturers more than doubled.
Boosted by government policies encouraging large-scale equipment upgrades and trade-ins of consumer goods, other high-tech industries also posted strong growth. Profits in the computer manufacturing sector more than doubled, soaring 124 percent, drone makers logged a doubling of profits and producers of electronic and electrical machinery posted an 88 percent jump.
Small and medium-sized businesses as well as private companies also saw an uptick in profit. Small firms’ profits edged up 0.5 percent in July, a big improvement from June’s 9.7 percent dive, while that of medium-sized firms swung to a 1.8 percent gain last month from a 7.8 percent drop in June. Private companies’ profits expanded 2.6 percent over the period.
However, the relatively low pricing of industrial goods remains a drag on profitability, despite the boost from large-scale equipment renewals and the trade-in of consumer goods, said Li Chao, chief economist at Zheshang Securities. Spurring demand will be key to easing that pressure. The scale and timing of fiscal policy will also be critical going forward.
