2024 Beijing International Automotive Exhibition starts in Beijing on April 25, 2024. ( The Yomiuri Shimbun via AP Images )
Ichiro Ohara/AP via dpa
Chinese manufacturers’ profits fell last month, but automakers made significant gains in the first quarter.
Weak domestic demand is prompting Chinese companies to sell their products abroad en masse.
China became the world‘s largest car exporter last year, overtaking Tesla in electric vehicle sales.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.
Profits at major Chinese manufacturers fell last month, but automakers posted a significant gain in the first quarter – one of the sectors that worries U.S. officials.
The National Bureau of Statistics (NBS) reported on Saturday that major manufacturers’ profits fell 3.5 percent in March compared to a year earlier. In the first three months of the year, profits rose 4.3 percent to 1.51 trillion yuan (194 trillion euros).
The new data highlights how weak domestic demand is eating into Chinese manufacturers’ profits and prompting companies to sell their products abroad en masse. US Treasury Secretary Janet Yellen and Secretary of State Antony Blinken visited China last month and warned about Chinese companies undercutting other manufacturers.
Blinken said at a news conference Friday that he had spoken with Chinese officials about overcapacity in key industries, including solar panels, electric vehicles and batteries.
“China alone produces more than 100 percent of global demand for these products, flooding markets, undermining competition and endangering livelihoods and businesses around the world,” Blinken said.
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A real wreck is about to happen
A major concern of the United States is protecting domestic automobile production. Although Chinese auto companies don’t sell cars in many major markets such as the United States, Chinese automakers’ overall profit rose 32 percent in the first quarter compared to a year earlier, the NBS said.
China needs to develop new markets for many goods because domestic demand has grown much more slowly than output. Last year, China and Japan went head-to-head for the title of world‘s largest car exporter, with Chinese electric vehicle maker BYD overtaking Tesla.
So far, increased production of electric vehicles hasn’t led to a big increase in inventory levels – the kind of overproduction that hurts other industries like one „Bloomberg“-Analyse revealed earlier this month.
And cars weren’t the only bright spot in the first quarter: Electronics industry profits rose 82.5 percent year-on-year, according to NBS data.
Michael Froman, the U.S. Trade Representative during the Obama administration, said Thursday told CNBCthat China’s export-led growth comes just as international markets are closing in on the country. China has publicly dismissed US warnings about overproduction as maneuvers in the run-up to the presidential election.
“There is a real wreck brewing here that represents the next generation of trade conflicts,” said Froman, who is now president of the Council on Foreign Relations. “This is more than just election year news.”
China is focused on boosting domestic demand and boosting business confidence, NBS analyst Yu Weining wrote in a statement accompanying the data released on Saturday. Overall domestic demand is subdued as the country faces a weakening GDP and a choppy real estate market.
Read the original article in English here.