China’s industrial profits remain weak

From China’s NBS:

National Bureau of Statistics 7 Yue 27 release of industrial enterprise financial data show that 2019 first half-year, profits of industrial enterprises above designated size decreased year on year by 2.4% , which, in the first quarter fell 3.3 percent , decline in the second quarter by 1.9% , showing a decline narrowed situation.

The benefits of industrial enterprises in the first half of the year showed the following characteristics:

First, new profits are mainly derived from industries such as building materials, electric power and electrical machinery. In the first half of the year, among the 41 major industrial sectors, profits in 26 industries increased year-on-year, accounting for 63.4% . Among them, the industries with more profit added were: the building materials industry’s profit increased by 11.9% , the power industry increased by 11.5% , the electrical machinery and equipment manufacturing industry increased by 13.0% , and the wine, beverage and refined tea manufacturing industry increased by 16.9% . These four industries collectively boosted the profit growth of all industrial enterprises above designated size by 2.6 percentage points.

Second, the profits of consumer goods manufacturing industry grew rapidly, and the profits of strategic emerging industries and high-tech manufacturing industries continued to grow. In the first half of the year, consumer goods manufacturing profits increased by 7.4% year-on-year , strategic emerging industries increased by 2.3% , and high-tech manufacturing grew by 0.4% .

Third, the profits of private enterprises have maintained growth. In the first half of the year, private enterprise profits increased by 6.0% year-on-year .

Fourth, the asset-liability ratio has declined. At the end of June , the asset-liability ratio of industrial enterprises above designated size was 57.0% , a decrease of 0.3 percentage points year-on-year . Among them, the asset-liability ratio of state-owned holding companies was 58.5% , a decrease of 1.1 percentage points.

Overall, industrial profits declined in the first half of the year, mainly due to a small number of industries such as automobiles, petroleum processing and steel. Due to sluggish market demand, the profit of automobile manufacturing industry in the first half of the year dropped sharply by 24.9% . Due to factors such as rising crude oil and iron ore prices, the profit of petroleum processing and steel industry decreased by 53.6% and 21.8% respectively . The total impact of the above three industries on industrial enterprises above designated size decreased by 6.3 percentage points year-on-year .

June was down 3.1% so there is little sign of improvement despite the glowing rhetoric. This goes with weak producer inflation and falling PMIs to cast fatal doubt over Q2’s supposed industrial rebound.

Chinese industry is in recession whether or not they care to admit it.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Latest posts by Houses and Holes (see all)

Comments are hidden for Membership Subscribers only.