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Industrial Profits in China Show Signs of Recovery in First Half of 2020

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Industrial Profits in China Show Signs of Recovery in First Half of 2020

Industrial Profits in China Show Recovery in First Half of Year

Data released by the National Bureau of Statistics on the 27th revealed that profits of industrial enterprises above designated size in China fell by 16.8% year-on-year in the first half of the year. However, the decline in profits narrowed month by month, indicating a steady recovery of industrial enterprises.

Manufacturing profits saw a significant improvement in the first half of the year. Out of the 41 major industrial sectors, 30 industries experienced a year-on-year growth in profit, with the decline in profits narrowing compared to the first quarter. Manufacturing profits played a crucial role in this improvement, leading to a 7.4 percentage point reduction in the decline of industrial profits above designated size.

Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, cited the continuous recovery of demand, support from macro rescue and assistance policies, as well as the growth in high-tech, equipment manufacturing, and new energy industries as factors contributing to the overall operating conditions of the domestic industrial sector.

The equipment manufacturing industry showed significant growth, with profits increasing by 3.1% year-on-year, a shift from decline to increase. Sun Xiao, a statistician from the Industry Department of the National Bureau of Statistics, mentioned that equipment manufacturing profits accounted for 34.3% of industries above designated size.

Profits also improved in specific industries such as electrical machinery, automobile, railway, ship, and aerospace and transportation equipment industries. Electrical and water industries experienced continued growth, with profits in the electricity, heating, gas, and water production and supply sectors increasing by 34.1% year-on-year.

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Different types of enterprises also showed improved profits, particularly small, private, and foreign-funded enterprises. In the first half of the year, the decline in profits of large, medium, and small enterprises narrowed, as did the decline in profits of private, foreign, and Hong Kong, Macao, and Taiwan-invested enterprises.

In June, the profits of industrial enterprises above designated size fell by 8.3% year-on-year, showing a decline rate narrower than that of May.

Pang Ming, Chief Economist of Jones Lang LaSalle China District, highlighted the consolidated recovery trend of industrial enterprises’ profits, noting that the production and operation pressure of enterprises has been further eased.

The cost per 100 yuan of operating income for industrial enterprises above designated size decreased in June compared to May, while the profit margin of operating income increased, indicating an improvement in unit cost margin and profit margins.

Sun Xiao emphasized the need to scientifically implement macroeconomic policies to stimulate effective demand, improve production and sales connections, and cultivate new growth drivers for the industrial economy’s high-quality development.

Looking ahead to next year, Zheng Houcheng, Chief Macro-economist of Yingda Securities Co., Ltd., predicted that the year-on-year growth rate of industrial enterprises’ profits is expected to increase as the economy enters the stage of passive destocking and active inventory replenishment.

Disclaimer: The Securities Times provides information for reference only and does not constitute investment advice. Readers should exercise caution when making investment decisions.

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