Heading 1: China’s Industrial Profits Continue to Decline, Reinforcing Need for Policy Support
Heading 2: Slump in Profits Reflects Softening Demand and Economic Challenges
Heading 3: Industrial Earnings Contracted by 12.6% in May, Adding to Previous Declines
Heading 4: Corporate Struggles Highlight the Need for Policy Measures
Heading 5: Auto Manufacturers See a Doubling in Year-on-Year Profit in May
Heading 6: Domestic Demand Insufficient for Further Recovery in Industrial Profits
Heading 7: Foreign Firms and Private-Sector Companies Experience Declines in Earnings
Heading 8: Petroleum, Coal, and Fuel Processing Industry Reports Heftiest Slump in Profits
Heading 9: Patchy Recovery Prompts Downgraded Growth Forecasts for China
Heading 10: Policymakers Expected to Deliver More Support Measures to Stabilize the Economy
Heading 11: China Implements Key Lending Rate Cuts and Purchase Tax Breaks on New-Energy Vehicles
Heading 12: Premier Li Qiang Promises More Effective Policy Measures to Expand Domestic Demand
Heading 13: Second-Quarter Economic Growth Expected to Be Higher Than First Quarter
Heading 14: Government Remains Cautious Amid Lingering Concerns Over Debt and Risks
Heading 15: Industrial Profit Numbers Cover Firms with Annual Revenues of at Least 20 Million Yuan
Heading 16: Second-Quarter GDP Growth Data to be Released in Mid-July
China’s industrial firms continue to face significant challenges as annual profits extended a double-digit decline in the first five months of the year. The 18.8 percent year-on-year slump in profits adds to the previous contraction of 20.6 percent in January-April, indicating a loss of momentum in the economy. This decline is seen across various sectors, including retail sales, exports, and property investment, while the youth jobless rate reached a fresh high of 20.8 percent. The National Bureau of Statistics reported that industrial earnings contracted by 12.6 percent in May alone, following an 18.2 percent decline in April. These figures highlight the sustained difficulties facing business operations in China.
According to Wu Chaoming, deputy director of the Chasing International Economic Institute, the slow recovery in industrial profits emphasizes the need for more policy measures to support struggling companies. While there is some hope for a turnaround, with auto manufacturers experiencing a doubling in year-on-year profit in May, this increase partly reflects the poor performance of the previous year due to COVID-19 restrictions. The external environment remains complicated and severe, and domestic demand appears insufficient to drive further recovery in industrial profits. NBS statistician Sun Xiao noted that the foundation for a revival in industrial profits is still not solid.
The decline in profits is not limited to specific types of companies. Foreign firms recorded a 13.6 percent decline in earnings from January to May, while private-sector companies experienced a 21.3 percent slide. Among major industrial sectors, profits sank for 24 out of 41, with the petroleum, coal, and fuel processing industry reporting the heftiest slump at 92.8 percent. These figures reflect the overall challenges faced by businesses in China.
The patchy recovery of the Chinese economy has led global agencies such as S&P Global and Goldman Sachs to revise down their growth forecasts for the country this year. As a result, economists expect policymakers to implement additional support measures to stabilize the economy, particularly in the face of softening demand in major overseas markets. To address the faltering rebound, China recently cut its key lending benchmarks for the first time in 10 months and introduced a 520-billion-yuan ($72 billion) package of purchase tax breaks on new-energy vehicles until the end of 2027.
Premier Li Qiang, in his keynote speech to the Summer Davos Forum in Tianjin, stated that China will roll out more effective policy measures to expand domestic demand. He expressed optimism that China’s second-quarter economic growth will surpass that of the first quarter and is expected to achieve the 2023 growth target of around 5 percent. However, the government remains cautious in reviving the economy due to concerns over local government debt and other longer-term risks.
It is important to note that the industrial profit numbers cover firms with annual revenues of at least 20 million yuan from their main operations. The second-quarter gross domestic product growth data for China will be released in mid-July, providing further insights into the state of the economy and its recovery progress.