According to Reuters article published on May 27, 2023, profits at China's industrial firms slumped in the first four months of 2023, official data showed on Saturday, as companies continued to struggle with margin pressures and soft demand amid a faltering economic recovery.
Profits fell 20.6% in January-April from a year earlier, compared with a 21.4% decline in the first three months, according to data from the National Bureau of Statistics (NBS).
In April alone, industrial firms posted a 18.2% drop in profit year-on-year, according to the NBS, which only occasionally gives monthly figures. Profits shrank 19.2% in March.
"Overall, today's data shows that industrial enterprises, especially private and equity-owned enterprises, continue to be affected by a combination of unfavourable factors such as the base effect, short-term pressure on the economic recovery and the downward trend of PPI (producer prices)," said Bruce Pang, chief economist at Jones Lang Lasalle.
Chinese companies are struggling with both weak demand at home and softening demand in the country's major export markets.
Producer deflation deepened in April, with the producer price index (PPI) falling at the fastest clip since May 2020.
"Overall, today's data shows that industrial enterprises, especially private and equity-owned enterprises, continue to be affected by a combination of unfavourable factors such as the base effect, short-term pressure on the economic recovery and the downward trend of PPI (producer prices)," said Bruce Pang, chief economist at Jones Lang Lasalle.
Chinese companies are struggling with both weak demand at home and softening demand in the country's major export markets.
Producer deflation deepened in April, with the producer price index (PPI) falling at the fastest clip since May 2020.
Foreign firms saw their profits slide 16.2% in January-April from a year earlier, while private-sector firms recorded a 22.5% plunge, according to a breakdown of the data.
Profits sagged for 27 of 41 major industrial sectors during the period, with the ferrous metal smelting and rolling processing industry reporting the biggest slump at 99.4%.
In the next stage, China will focus on restoring and expanding demand, further improve the level of production and marketing, and boost business confidence, NBS statistician Sun Xiao said.
The grim profit readings came after a batch of April economic indicators, spanning industrial output, retail sales and property investment, suggested that a recovery in the world's second-largest economy is losing momentum.
Beijing has set a modest growth target of around 5% for this year. Signs of a brisk recovery in the wake of the country's abrupt end of COVID curbs late last year had prompted many institutions including the World Bank to raise their China growth estimates for 2023.
Nonetheless, some investment banks have recently lowered their 2023 China growth forecasts after the April data disappointment, with Nomura ratcheting down its prediction to 5.5% from 5.9% previously and Barclays revising its view down to 5.3% from 5.6%.
Earlier this month, Premier Li Qiang vowed more targeted measures to expand domestic demand and stabilise external demand in an effort to promote a sustained economic rebound.
Industrial profit numbers cover firms with annual revenues of at least 20 million yuan ($2.89 million) from their main operations.
($1 = 6.9121 Chinese yuan renminbi)
