Chinese Industrial Profits Falling

Growth in Chinese industrial companies’ profits slowed in March, adding to evidence the nation’s economic recovery is losing steam.

Net income increased 5.3 percent from a year earlier to 464.9 billion yuan ($75 billion), down from a 17.2 percent pace in the first two months, the National Bureau of Statistics said on its website on April 27. Profit in the first quarter rose 12.1 percent to 1.17 trillion yuan, it said.

China’s stocks fell for a third straight month in April amid investor concern that the recovery in the country’s economic expansion is losing momentum and will hurt corporate earnings. The benchmark Shanghai Composite Index (SHCOMP) closed 1 percent lower on April 26, the last trading day before a three- day holiday ending May 1.

“Profits are only growing in line with sales and with problems of overcapacity and the sluggish global picture, it doesn’t bode well for a speedy return to higher profit margins,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. “Heavy industries especially still face destocking and higher costs, but if there is a silver lining, industries catering to the consumer, like textiles, food and beverages, seem to be doing much better.”

Industrial companies’ revenue rose 11.9 percent in the first three months to 22.2 trillion yuan, according to the statistics bureau statement. That’s down from 13.1 percent in the first two months. The bureau doesn’t break down January and February data due to distortions caused by the timing of the Lunar New Year holiday. No figure was given for March sales.

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.