China’s industrial profits suffer biggest drop this year, Reuters adds to economic woes

BEIJING (Reuters) – China’s industrial profits returned to a sharp contraction in August for their biggest drop this year, official data showed on Friday, adding to a recent string of gloomy business readings pointing to a increasing pressure on the economy.

Profits fell 17.8 percent in August from a year earlier, after a 4.1 percent rise in July, while earnings rose 0.5 percent slower in the first eight months, compared with a 3 .6% in the January-July period, according to the National Bureau of Statistics. (NBS).

The drop in August was due to factors such as “the lack of effective market demand, the greater impact of natural disasters such as high temperatures, heavy rains and floods in some areas,” said NBS statistician Wei Ning.

A high statistical base last year also amplified the reversal, with falling profits in the auto and equipment manufacturing industries weighing on the outcome, said Zhou Maohua, macroeconomic researcher at China Everbright (OTC:) Bank.

A sluggish run of data earlier this month exacerbated concerns about an anemic recovery, prompting global brokerages to revise their growth forecasts for China to 2024 below the official target of around 5 percent.

Underscoring weak domestic demand, a key drag on the economy amid job security anxiety and worsening slumps in property sales and investment, domestic dairy giant Inner Mongolia Yili Industrial Group Co posted a 40 percent drop in quarterly net profit II.

“Domestic consumer demand remains weak, while the external environment is complex and changing,” said the SNB’s Wei.

To inject much-needed optimism into the economy, China’s central bank on Tuesday announced its most aggressive stimulus since the pandemic, including a 50 basis point cut in bank reserve requirements.

But analysts have warned that further easing of demand, particularly fiscal aid, will be vital to restoring confidence.

Chinese leaders on Thursday pledged “necessary fiscal spending” to meet this year’s economic growth target.

China plans to issue $284 billion in sovereign debt this year as part of a new fiscal stimulus, some of the proceeds raised through special bonds used to provide a monthly allowance of $114 per child to all households with two or several children, excluding the first. child, Reuters reported.

State-owned firms posted profits down 1.3 percent in January-August, foreign firms posted a 6.9 percent increase, while private sector companies posted a 2.6 percent increase, a breakdown of NBS data.

The industrial profit figure covers firms with annual revenue of at least 20 million yuan ($2.83 million) from their core operations.

($1 = 7.0565)