China economy: ‘uneven’ corporate performance in spotlight as industrial profit growth slows in April
- Record-setting commodity prices in recent weeks, and China’s underperforming consumer goods sector, weigh heavy on manufacturers
- For April, profits at China’s industrial firms rose by 57 per cent, year on year – down from a 92.3 per cent increase in March
With high commodity prices preventing many factories from being able to turn a profit, overall earnings at China’s industrial firms grew at a slower pace in April.
For April, profits at China’s industrial firms rose by 57 per cent, year on year, to 768.63 billion yuan (US$120.22 billion). That was down from a 92.3 per cent increase in March, data from the National Bureau of Statistics (NBS) showed on Thursday.
For the January-April period, industrial firms’ profits grew 106 per cent from the same period a year earlier, to 2.59 trillion yuan – bolstered by a low comparison base because of a virus-related plunge in activity early last year.
“The improvement in corporate performance is still uneven,” NBS official Zhu Hong said 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.”
Firms specialising in chemical products and metals processing recorded some of the highest year-on-year profit increases over the year’s first four months, according to NBS data, as they recovered from the coronavirus-induced slump in economic activity in the same period last year.
Profits surged 484 per cent from January-April in the non-ferrous metals smelting and pressing industry. Synthetic fibre manufacturing posted a 650.2 per cent profit increase.
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 have warned industrial metals companies to maintain “normal market order” during talks regarding the 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 coronavirus cases in Asia, Pang said.
Officials warn that 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 per cent.
Liabilities at industrial firms increased 8.6 per cent year on year at end-April, down from 9.0 per cent growth as of end-March.
The industrial-profit data covers large firms with annual revenues of more than 20 million yuan from their main operations.