BEIJING – China’s industrial profits swung back to a sharp contraction in August for their biggest decline this year, official data showed on Sept 27, adding to a recent spate of bleak business readings that point to mounting pressure on the economy.
Profits plunged 17.8 per cent in August from a year earlier following a 4.1 per cent increase in July, while earnings rose at slower 0.5 per cent pace in the first eight months compared with 3.6 per cent growth in the January-July period, according to the National Bureau of Statistics (NBS).
The slump in August was due to factors such as “the lack of effective market demand, the greater impact of natural disasters such as high temperatures, heavy rains, and floods in some areas”, said NBS statistician Wei Ning.
A high statistical base last year also magnified the reversal, with falling profits in the automobile and equipment manufacturing industries weighing on the outcome, said China Everbright Bank macroeconomic researcher Zhou Maohua.
A sluggish run of data earlier this month has exacerbated worries about an anaemic recovery, prompting global brokerages to revise down their 2024 China growth forecasts to below the official target of around 5 per cent.
Highlighting weak domestic demand, a key bottleneck for the economy amid job security anxiety and worsening slumps in property sales and investment, domestic dairy giant Inner Mongolia Yili Industrial Group Co posted a 40 per cent fall in second-quarter net profit.
“Domestic consumer demand remains weak while the external environment is complex and changeable,” said NBS’ Wei.
To pump some much-needed optimism into the economy, China’s central bank announced on Sept 24 the most aggressive stimulus since the pandemic, including a 50 basis point cut on banks’ reserve requirements.
But analysts warned more demand-side easing, especially fiscal help, would be