China Industrial Profits Drop As Demand From Overseas Stalls
China’s industrial companies’ profits fell in March as exports flagged and deflationary pressures persisted, suggesting the economy’s stronger-than-expected growth early this year might be tough to maintain.
(Bloomberg) -- China’s industrial companies’ profits fell in March as exports flagged and deflationary pressures persisted, suggesting the economy’s stronger-than-expected growth early this year might be tough to maintain.
Industrial profits at large-scale Chinese companies declined 3.5% from a year earlier in March, according to data published by the National Bureau of Statistics on Saturday. For the first three months of the year, profits rose 4.3% to 1.51 trillion yuan ($208 billion), slowing from a post-Covid rebound.
The March decline followed a 10.2% gain in the January-February period, and ended seven straight months of increases. Exports, which unexpectedly slumped in March, offered little help to offset weak domestic demand.
Falling factory-gate prices have squeezed profit margins and led industrial firms to double down on foreign markets, with domestic demand still weak amid a housing slump. Mounting geopolitical risks could make that harder. Western countries accuse China of building excess capacity in its factories and dumping cheap products abroad — and they’ve launched probes into industries like electric vehicles and shipbuilding, and hinted at new trade barriers.
All of this has left authorities under pressure to prop up the domestic market with more fiscal and monetary stimulus. Economists expect the central bank to cut interest rates this year, while the government has announced a program to boost consumer spending on cars and household appliances by offering subsidies for trade-ins of older models.
“Industrial companies’ profit has maintained growth momentum in the first quarter” but the recovery among companies “is still not balanced,” Yu Weining, an NBS analyst, said in a statement accompanying the data release. The nation will seek to “boost domestic demand and continue to improve the confidence of all types of business entities, and further strengthen the foundation of the recovery of the industrial economy.”
Some 28 out of China’s 41 main industries saw profits rise in the first three months, Yu said. Profits at miners dropped 18.5% while manufacturing and utilities recorded gains.
--With assistance from Pearl Liu.
(Adds analyst comments from sixth paragraph.)
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