Industrial Profits in China Show Signs of Recovery
Data source: Mapping by Zhang Dawei, National Bureau of Statistics
In the first half of this year, industrial enterprises above the designated size in China experienced a 16.8% year-on-year decline in profits, according to data released by the National Bureau of Statistics. However, the cumulative decline in profits showed a decreasing trend from month to month, indicating a partial recovery in the industrial sector.
The manufacturing industry, in particular, saw significant improvement in profits. Among the 41 major industrial sectors, 30 industries witnessed faster year-on-year profit growth compared to the first quarter, or a narrowing of profit decline. These industries accounted for over 70% of the total, resulting in a 7.4 percentage point reduction in the decline of industrial profits above the designated size compared to the first quarter.
Zhou Maohua, a macro researcher in Everbright Bank’s China Financial Market Department, explained that the overall operating conditions in the domestic industrial sector improved during the first half of the year. This was supported by factors such as increased demand, government policies, and reduced operating costs in manufacturing. Additionally, high-tech industries, equipment manufacturing, and new energy sectors experienced rapid profit growth, contributing to the overall recovery.
Sun Xiao, a statistician from the Industry Department of the National Bureau of Statistics, highlighted the positive performance of the high-end equipment manufacturing industry. He stated that manufacturing tool profits increased by 3.1% year-on-year, marking a positive shift from decline to progress. Equipment manufacturing also accounted for 34.3% of industries above the designated size, indicating robust growth.
Several industries showed notable profit growth. The electrical machinery, automobile, railway, ship, aerospace, and transport sectors experienced profit increases of 29.1%, 10.1%, and 35.3%, respectively. The general equipment industry also saw a profit rise of 17.9%, fueled by industrial chain development.
Market demand recovery led to improved profits in most consumer goods manufacturing industries. In the first half of the year, 10 out of 13 major consumer goods industries experienced a narrower profit decline or a shift from decline to growth compared to the first quarter, accounting for 76.9% of these industries.
The electricity and water industry continued its profit growth momentum. During the first half of the year, the electricity, heating, gas, and water production and supply industries witnessed a 34.1% year-on-year profit increase, driven by factors such as national economic recovery and renewable energy generation.
Profits also improved for different types of enterprises, with small, private, and foreign-funded companies showing significant advancements. Compared to the first quarter, large, medium, and small enterprises reduced their profit decline by 4.1, 4.9, and 5.6 percentage points, respectively. Similarly, private and foreign and Hong Kong, Macao, and Taiwan invested enterprises saw their profit decline decrease by 9.5 and 12.1 percentage points respectively.
Despite a year-on-year profit decline of 8.3% in June, the rate of decline decreased by 4.3 percentage points compared to May. This indicates further consolidation of the industrial enterprise profit recovery trend.
Economist Pang Ming from Jones Lang LaSalle China Region stated that the industrial production boom rebounded in June, surpassing expectations and continuing to improve month-on-month. This is further evidence of the eased pressure on enterprise production and operation.
In June, the cost per 100 yuan of operating income for industrial enterprises decreased by 0.83 yuan compared to May. Additionally, the operating income margin increased by 0.27 percentage points to 6.44% compared to May. These figures reflect improved unit cost and profit margin recovery.
Sun Xiao noted that overall, industrial enterprise profits are continuing to recover. Looking ahead, it is imperative to implement appropriate macro policies, focus on expanding effective demand, strengthen the connection between production and sales, stimulate business entity vitality, and promote high-quality industrial development.
Zheng Houcheng, chief macroeconomist at Yingda Securities Co, Ltd., predicts that next year’s economy may shift to a stage of active inventory replenishment, resulting in a year-on-year growth rate of industrial enterprise profits.
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Data source: Mapping by Zhang Dawei, National Bureau of Statistics
According to data released by the National Bureau of Statistics on the 27th, in the first half of the year, the profit of industrial enterprises above the designated size fell by 16.8% year on year, the cumulative profit decline decreased from month to month, and the profit of industrial enterprises recovered in constant
During the first half of the year, manufacturing profits improved significantly. The data shows that, among the 41 major industrial sectors, 30 industries have a year-on-year profit growth rate that has accelerated compared to the first quarter, or the decline has narrowed, and the decline has turned into an increase, accounting for more. than 70%. The decline in manufacturing profits resulted in the decline in industrial profits above the designated size narrowing by 7.4 percentage points compared to the first quarter.
According to Zhou Maohua, a macro researcher in Everbright Bank’s China Financial Market Department, during the first half of the year, the overall operating conditions of the domestic industrial sector maintained a trend of improvement, and the upstream and downstream profit structures continued. a river to heal. It is mainly due to the continued recovery of demand, the support of rescue policies and macro support, the gradual relaxation of the pressure on the comprehensive operating costs of industries such as manufacturing, together with the rapid growth of profits in high-tech industries, equipment manufacturing and new energy industries.
“Since the beginning of this year, the high-end equipment manufacturing industry has been cultivated and grown, and the development of green and low-carbon industries has been strong. In the first half of the year, the profit of the manufacturing industry tools increased by 3.1% year on year, realizing a change from decline to progress.” Sun Xiao, a statistician from the Industry Department of the National Bureau of Statistics, presented that equipment manufacturing profit accounted for 34.3% of industries above the designated size, an increase of 6.8 and 6.7 percentage points from the first quarter and the same period of the previous year respectively.
In terms of specific industries, the profits of the electrical machinery, automobile, railway, ship, aerospace and transport industries increased by 29.1%, 10.1%, and 35.3% respectively; The general equipment industry was stimulated by the development of the industrial chain. , and the profit increased by 17.9%.
The gradual release of market demand has led to improved profits in most consumer goods manufacturing industries. In the first half of the year, among the 13 major consumer goods manufacturing industries, the year-on-year decline in profits of 10 industries narrowed or turned from a decline to an increase compared to the first quarter, accounting for 76.9% .
The profits of the electricity and water industry continued to grow. During the first half of the year, the profits of the electricity, heating, gas and water production and supply industries increased by 34.1% year on year, continuing to grow rapidly. Among them, driven by factors such as the continued recovery of the national economy, guaranteed power supply during the peak summer season, and the rapid development of renewable energy power generation, the power industry has continued to grow in power generation, and the industry’s profits have increased by 46.5% year on year.
The data shows that the profits of different types of enterprises have improved, and small, private and foreign-funded enterprises have improved significantly. In the first half of the year, among industrial enterprises above the designated size, the year-on-year decline in profits of large, medium and small enterprises fell by 4.1, 4.9 and 5.6 percentage points respectively compared to the quarter first. The decrease in profits of private, foreign and Hong Kong, Macao and Taiwan invested enterprises decreased by 9.5 and 12.1 percentage points respectively compared to the first quarter.
Judging from the monthly growth rate, in June, the profit of industrial enterprises above the designated size decreased by 8.3% year on year, and the rate of decline decreased by 4.3 percentage points compared to May.
“The trend of industrial enterprise profit recovery has been further consolidated, and the pressure of enterprise production and operation has been further eased. This is jointly confirmed by the macro data in June that the industrial production boom has rebounded in more than expected and has continued to improve month on month.” Jones Lang LaSalle China Region Chief Economist Pang Ming said.
In June, the cost per 100 yuan of operating income of industrial enterprises above the designated size decreased by 0.83 yuan compared with May; operating income margin was 6.44%, an increase of 0.27 percentage points compared to May. This reflects an improvement in the company’s unit cost price and a quarter-on-quarter recovery in profit margins.
“As the prices of upstream mineral products continue to fall, the pressure on the cost of raw materials for industrial enterprises has decreased, which has boosted the marginal improvement of the unit cost of enterprises,” said Sun Xiao.
Sun Xiao emphasized that, in general, the profits of industrial enterprises continue to recover. In the next step, it is necessary to implement macro policies scientifically and correctly, focus on expanding effective demand, improve the level of production and sales connection, stimulate the vitality of business entities, cultivate and expand new growth drivers, and promote high quality. the development of the industrial economy.
“During the past two years, my country’s macro-economy has been in the period of active destocking, and the total profit of industrial enterprises has experienced negative growth year after year. Under this background, next year’s economy is likely to be in the stage of passive destocking and active inventory replenishment. The year-on-year growth rate of industrial enterprise profits is expected next year to Zheng Houcheng, chief macroeconomist of Yingda Securities Co, Ltd. .
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