China’s industrial profit slows as material prices soar
China’s industrial firms have seen their profits slow in recent months, as raw material prices put pressure on factories.
Recovery post-coronavirus in the industry has seen weaknesses in higher materials prices and hits to global supply chains.
Year-on-year profit for Chinese industrial firms climbed 20 per cent in June to 791.8bn yuan (£88.5bn), according to the National Bureau of Statistics, following a 36.4 per cent rise the month prior.
Although the origin of Covid-19, China’s economy has recovered from disruptions and challenges the country faced. However, more recent challenges have caused a strain on the industry once again.
Zhu Hong, a senior statistician for NBS, said, “the unevenness in the recovery of corporate profitability still exists, with private firms and small businesses facing a slow rebound.
Commodity prices continue to stay at high levels, squeezing the profitability of enterprises, and there are still weak points in supply chains and industrial chains.”
Policymakers have pushed for high commodity prices to decrease as the costs could cause a rise in costs for consumers. China’s producer price inflation eased in June but analysts expect annual commodity prices to remain high in the second half of the year.
In the first six months of 2021, profits for industrial firms grew 66.9per cent, after the industry saw a slump the previous year due to the pandemic.
Analysts from investment banking company Goldman Sachs said, “profit margin of upstream industrial enterprises improved further while downstream profit margin edged down slightly.”
The factory industry slowed in Chinese province Guangdong over the month of June due to coronavirus cases rising, causing a slowdown in processes.
NBS data suggests that metal, chemical, and pharmaceutical processing industries were the leading causes for profit growth.