Chinese industrial companies’ profit swung into a sharp contraction in August and tumbled at the fastest pace since May 2023, adding to a recent spate of bleak readings that point to mounting pressure on the economy.
Profits plunged 17.8% in August from a year earlier, compared to a 4.1% increase in July, while for the first eight months of the year, profit rose slower at 0.5%, compared with 3.6% in the January-July period, according to the National Bureau of Statistics (NBS) on Friday.
The sharp slowdown in industrial profit growth was mainly due to decelerating growth in industrial revenue, which grew by 2.4% year over year in the first eight months of the year, compared to 2.9% growth in the first seven months of the year, showed the data.
Among the three major sectors, the manufacturing sector’s profit grew by 1.1% year over year in the January – August period, slowing by 3.9 percentage points from the first seven months, the utilities sector’s profit grew by 14.7%, slowing by 5.4 percentage points, while the mining sector’s profit slid 9.2%, narrowing slightly by 0.3 percentage points, showed the data.
In the manufacturing sector, high-tech manufacturing companies’ profits grew by 10.9% year over year in the eight-month period, slowing by 1.9 percentage points, showed the data.
Notably, high-end, intelligent, and green manufacturing industries’ profit managed to maintain a high profit growth. Profits in spacecraft and carrier rocket manufacturing, smart vehicle equipment manufacturing, and lithium-ion battery manufacturing grew by 20.3%, 26.2%, and 29.9%, respectively. Profits in the semiconductor equipment manufacturing, sensitive component and sensor manufacturing, and optoelectronic device manufacturing grew by 14.5%, 42.9%, and 130.6%, respectively.
In the first eight months, the growth of consumer manufacturing profit slowed by 1.8 percentage points to 8.4%, ending the double-digit growth seen since the beginning of the year, while the growth of equipment manufacturing profits increased by 3.2%, slowing by 2.9 percentage points.
Profit growth slowed across different types of industrial companies, with profits of state-owned enterprises fell by 1.3% year over year in January – August, compared to the 1% growth in the first seven months, while foreign-invested enterprises and private enterprises slowed by 3.0 and 4.7 percentage points, respectively, to 6.9% and 2.6%.
The cost pressures continued to rise, while profit margins weakened. The cost per 100 yuan of operating revenue was 85.39 yuan in the January – August period, an increase of 0.19 yuan from a year earlier and rising by 0.17 yuan from the first seven months.
Expenses per 100 yuan of operating revenue were 8.41 yuan, an increase of 0.04 yuan year-on-year, remaining flat compared to the previous period. During the same period, the profit margin from operating revenue was 5.34%, a year-on-year decline of 0.10 percentage points, and 0.06 percentage points lower than the previous value.