BEIJING (Reuters) – Profit growth for Chinese industrial companies in July rose at its slowest pace this year, as high commodity prices and supply chain constraints due to extreme weather conditions as well as ‘sporadic cases of coronavirus have weighed on the manufacturing sector.
The data adds to a recent batch of indicators highlighting the loss of momentum in the world’s second-largest economy, suggesting that policymakers are likely to maintain supportive measures to support growth.
Profits of industrial companies rose 16.4 percent on an annual basis in July to reach 703.67 billion yuan ($ 108.51 billion), data from the National Bureau of Statistics (NBS) showed on Friday. This compares to a 20% gain in June.
China’s economy has experienced an impressive recovery from a coronavirus crisis, but the expansion falters as businesses grapple with higher costs and supply bottlenecks, and consumers remain cautious in their spending.
“Overall, the profits of industrial enterprises above the designated size maintained steady growth in July, but we must recognize that the inequality and uncertainty in the recovery of corporate profits still exists,” he said. said Zhu Hong, senior statistician at NBS.
Zhu attributed the slowdown in growth in July to sporadic cases of COVID and flooding, as well as high commodity prices that put pressure on the profitability of small mid-level and downstream businesses.
In the first seven months of the year, industrial company profits rose 57.3% year on year, due to base effects, although growth slowed from the sharp increase of 66, 9% in the first half of 2021.
Production growth at Chinese factories slowed sharply in July, and analysts expect it to come under increasing pressure due to COVID-19 social distancing rules and tightening measures in the real estate sector. and highly polluting industries.
Commodity prices have fallen in recent months, hurting the results of many mid-level and downstream factories. Chinese coke and coking coal futures hit record highs this week, while iron ore futures rose for the fourth day on Thursday.
The more transmissible Delta strain COVID-19 cases in July and record rainfall in the transportation hub of Henan province have also hurt industrial production. The terminal at China’s main port of Ningbo has halted services as part of the government’s efforts to curb the spread of the virus.
The liabilities of industrial companies increased by 8.2% year-on-year at the end of July, against a growth of 8.5% at the end of June.
The industrial profit data covers large companies with annual revenues of more than 20 million yuan from their main operations.
($ 1 = 6.4850 yuan Chinese renminbi)
(Reporting by Colin Qian, Stella Qiu and Ryan Woo; Editing by Shri Navaratnam)