BEIJING – Profits of China’s industrial companies have slumped in the first four months of 2023, official data showed on Saturday, as companies continued to grapple with margin pressures and weak demand amid a faltering economic recovery.
According to the National Bureau of Statistics (NBS), January-April earnings fell 20.6% year over year, compared with a 21.4% decline in the first three months.
According to NBS, which only occasionally releases monthly figures, industrial companies saw profits fall 18.2% year over year. Earnings shrank 19.2% in March.
Domestic demand is weak, the recovery from the COVID crisis is losing momentum and demand in the country’s main export markets is falling. Industrial production recovered in April but still fell well short of expectations.
Lenovo, the world’s largest PC maker, said this week that quarterly sales and profits fell in January and March and that the company cut 8% to 9% of its workforce to cut costs as global demand for personal computers (PCs) continued to decline.
Producers of steel and other industrial metals are also suffering. Prices for rebar, used in construction, hit their lowest level in three years this week, and only a third of the country’s mills are currently operating profitably, according to consultancy Mysteel.
According to a breakdown of the data, foreign companies saw profits fall 16.2% year-on-year from January to April, while private-sector companies saw a 22.5% decline.
Profits fell in 27 out of 41 major industrial sectors during the period, with the ferrous metals smelting and rolling industry taking the biggest hit at 99.4%.
Saturday’s reads came after a series of economic indicators for April, which included industrial production, retail sales and property investment, suggested a recovery in the world’s second largest economy was losing momentum.
Beijing has set a modest growth target of around 5% for this year. Signs of a rapid recovery following the abrupt end to COVID containment measures late last year had prompted many institutions, including the World Bank, to upgrade their 2023 growth estimates for China.
Still, some investment banks recently lowered their 2023 growth forecasts for China following the disappointment of April’s data: Nomura cut its forecast to 5.5% from a previous 5.9% and Barclays revised its forecast to 5.3% from 5.6% % corrected down.
Earlier this month, Premier Li Qiang announced more focused measures to expand domestic demand and stabilize external demand to promote a sustained economic recovery.
The industrial earnings figures include companies with annual sales of at least 20 million yuan (US$2.89 million) from their main business. ($1 = 6.9121 Chinese Yuan Renminbi) (Reporting by Ella Cao, Qiaoyi Li and Bernard Orr; Editing by Kim Coghill)
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