Staff of Reuters 3 Minutes to Read BEIJING, China (Reuters) – In May, profit growth in China’s industrial firms fell once further as rising raw material prices pressured margins and halted factory activity. PHOTO FROM THE FILE: On May 17, 2020, a person works on a production line in Huzhou, Zhejiang Province, China, making steel constructions. REUTERS via China Daily Official data released on Sunday revealed that industrial profits in China increased 36.4 percent year on year in May to 829.92 billion yuan ($128.58 billion). According to the National Bureau of Statistics, this was a decrease from the 57 percent increase reported in April. The world’s second-largest economy has mostly recovered from COVID-19’s interruptions, but it now faces new obstacles like rising raw material costs and global supply chain constraints. China’s recovery, according to officials, is still unequal. High commodity prices exacerbated profit disparities between upstream and downstream enterprises, according to Zhu Hong, a statistics office official. In a statement accompanying the findings, he stated, “The platform for recovery is not yet solid.” Profits soared quickly in the metals, chemicals, and petroleum industries, but smaller and downstream businesses were put under a lot of stress, according to Zhu. Industrial earnings climbed 83.4 percent to 3.42 trillion yuan from January to May last year, compared to the same time the previous year. Factory-gate inflation grew at its sharpest rate in over a decade in May, owing to rising commodity prices, putting profit margins for mid- and downstream industries at risk. Chinese regulators have increased attempts to moderate runaway metals prices in recent weeks, including selling supply from state stockpiles, but with global demand continuing to improve, some experts believe the moves will have minimal impact. China’s official manufacturing data is projected to reflect a slower pace of growth in June, owing to interruptions caused by COVID-19 flare-ups at the country’s key southern ports. Investors will also be monitoring for any further evidence of margin erosion in developments in input costs and selling prices. Industrial liabilities were up 8.2 percent year over year at the end of May, compared to 8.6 percent a month earlier. The industrial profit data is for major companies with yearly revenues of more over 20 million yuan from their primary operations. Gabriel Crossley contributed reporting, and Kim Coghill and William Mallard edited the piece. Continue reading
