Profits of China’s major industrial firms drop in first half
July 28, 2020 Category China News Round-up, Weekly
Industrial profits at China’s biggest firms fell by 12.8% year-on-year in the first six months of 2020, but monthly growth returned in May and June from a year earlier, amid signs that the economy is getting back up to speed. They remained in the red over the first half of the year, due to the impact of the coronavirus. Last month, profits of industrial firms saw a year-on-year increase of 11.5%, from an increase of 6.0% in May, according to the National Bureau of Statistics (NBS).
In the first six months of the year, however, profits fell by 12.8%, with May and June representing the only months of growth in 2020. China’s economy grew by 3.2% in the second quarter, a dramatic turnaround on the minus 6.8% reported in the first quarter. Total profits for the first six months reached CNY2.51 trillion. In June alone, profits stood at CNY666.55 billion.
Mining companies saw their profits fall 41.7% in the first half of the year, while manufacturing companies – dealing with trade war tariffs on top of the coronavirus pandemic – were down 9.8%. Utilities firms saw a drop of 8.7% in profits from January to June. Among the 41 industrial sectors the NBS measures, just nine saw profits rise year-on-year in the first half. One sector was unchanged, while 31 saw their profits decline. One of the few in which profits increased was electronics, communications and computing where profits rose 27.2%. State-owned enterprises (SOEs) were less profitable than private firms. Their dividend tumbled 28.5% in the first six months compared to a year earlier. For private companies, there was an 8.4% decline, while foreign-invested companies experienced an 8.8% drop.
The overall six monthly profit drop of 12.8% was a slight improvement on the 19.3% drop over the first five months, and the record 38.3% year-on-year decline in the first two months of 2020. The improvement in May and June has come in line with other indicators which suggest China is the first major economy to have begun recovering from the pandemic, including successive positive purchasing managers’ indices, improving retail sales and industrial production, along with exports and imports which surprisingly both returned to growth in June. “Although the profits of industrial enterprises clearly recovered and improved in the second quarter, in general, market demand remained weak due to the impact of the coronavirus pandemic. Companies still face many difficulties in production and operations,” said Zhu Hong, Senior Statistician at the NBS, as reported by the South China Morning Post.
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