China's April Industrial Profits Fall 18%
At a factory in Hangzhou, China, a worker is welding a steel rim for a bicycle. The factory makes sports equipment. This photo was taken on September 2, 2019, and was shared by China Daily via REUTERS.
China's industrial firms had weak profits in the first four months of 2023. The data was disclosed on Saturday. The firms had issues with margin pressures and weak demand. To make things worse, the economy was also recovering slowly.
In January-April, profits went down 20.6% from last year. This is a bit better than the 21.4% drop in the first three months. The info comes from the National Bureau of Statistics (NBS).
The National Bureau of Statistics (NBS) reported that industrial firms had an 18.2% profit drop in April compared to the previous year. This information is only given occasionally on a monthly basis. In March, the profits decreased even further with a 19.2% reduction.
Today's data reveals that industrial companies are facing challenges due to various factors. These factors include the base effect, economic recovery pressure, and the decline in PPI. Private and equity-owned enterprises are particularly affected. Bruce Pang, who works as the chief economist at Jones Lang Lasalle, shared this opinion.
Companies from China are facing problems because demand is low in their own country and in the big markets they export to.
In April, the producer price index (PPI) fell faster than any other time since May 2020. This means producer deflation is becoming more severe.
Lenovo, who is the largest PC maker in the world, shared news that their revenue and profit decreased in the first quarter of the year. Due to the global decrease in demand for personal computers (PCs), they had to lay off around 8% to 9% of their workforce in order to cut costs.
The people who make steel and other metals are struggling. Prices for steel bars used in building are really low – the lowest in three years. Most mills in the country aren't making a profit, only a third of them are. This information comes from Mysteel, a company that advises businesses.
Baosteel said that the difference between the purchase and sales prices caused pressure in May. Steel prices went down because demand recovery was slower than expected. This information was shared on an investor interactive platform on May 22. Baosteel is a subsidiary of China Baowu Steel Group, which is the world's biggest steelmaker.
Profits of foreign companies dropped by 16.2% in January to April compared to last year. Private firms also saw a decrease of 22.5% in profits during the same period. This data has been analyzed and confirmed.
During that time, 27 out of 41 major industrial sectors experienced a drop in profits. The ferrous metal smelting and rolling processing industry saw the biggest decrease with a slump of 99.4%.
China's next focus is to restore and expand demand. They aim to improve production and marketing and boost business confidence. NBS statistician Sun Xiao shared this information.
The news is bad for profits. This is because economic indicators for April were not good. They show that the Chinese economy is not improving. These indicators measured things like how much was produced by factories, how much people bought at shops, and how much was spent on property. The Chinese economy is the second-biggest in the world.
The growth target for Beijing for this year is about 5%. The country is making a good recovery from COVID restrictions that ended last year. The World Bank and other institutions now think China's growth will be better in 2023.
Investment banks have lowered their China growth forecasts for 2023. This happened because the April data was bad. Nomura lowered its prediction from 5.9% to 5.5%. Barclays revised its view from 5.6% to 5.3%.
This month, Premier Li Qiang promised more measures to boost domestic and external demand. The goal is to improve the economy consistently.
The industrial profit data applies to companies that earn at least 20 million yuan annually. These earnings come from their primary business operations.
One renminbi is equal to 0.1447 US dollars. The exchange rate between renminbi and US dollars is often changing. As of now, one US dollar is worth around 6.91 renminbi. It's important to keep track of the exchange rate when traveling or exchanging money.
