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In December 2020, an electronic parts factory will be built in Wuhan, China. (Asahi Shimbun file photo)
BEIJING – Chinese industrial companies ‘earnings growth slowed again in May as rising commodity prices depressed margins and weighed on factory activity.
Chinese industrial companies’ profits rose 36.4% year over year in May to 829.92 billion yuan ($ 128.58 billion), official data showed on Sunday.
According to the National Bureau of Statistics, that was a slowdown from the 57% increase reported in April.
The world’s second largest economy has largely recovered from the disruptions caused by COVID-19, but is facing new challenges such as increased raw material costs and global supply chain crises. Officials warn that China’s recovery remains uneven.
High commodity prices have seen imbalances in profitability between upstream and downstream companies, said Zhu Hong, an official with the statistics bureau.
« The basis for Recovery is not yet solid, « he said in a statement on the data.
Profits in the metals, chemicals and petroleum sectors rose rapidly while smaller and downstream companies saw much more pressure, Zhu said.
From January to May, industrial company profits rose 83.4% year over year to 3.42 trillion yuan.
Factory gate inflation saw its fastest annual growth in over 12 years in May, driven by rising commodity prices that pose risks to profit margins for midsize and downstream businesses.
Chinese policymakers have stepped up their efforts in recent weeks to cool down soaring metal prices, including selling supplies from government reserves, but as global demand continues to recover, some analysts believe the measures will have limited impact.
China’s official production data this week is expected show weaker activity growth in June, likely due to disruption caused by COVID-19 outbreaks in the country’s major southern ports. In addition, investors will pay attention to the development of input costs and sales prices in order to recognize further signs of margin pressure.
The liabilities of industrial companies rose by 8.2% year-on-year at the end of May compared to 8.6% in the previous month.
The industrial profit data includes large corporations with annual sales of over 20 million yuan from their primary business.
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