Data published by the National Bureau of Statistics of China (NBS) showed that from January to March, the profits of industrial companies decreased by 21.4% per annum after falling by 22.9% per annum in the first two months of 2023. Another drop in profits signals continued pressure on the manufacturing sector, even though the Chinese economy as a whole is showing signs of recovery. Last week, the NBS said that in the 1st quarter, China's GDP growth accelerated to 4.5% from 2.9% in the 4th quarter. Economists had expected the economy to expand by 4%. This was the strongest pace of expansion since Q1 2022, amid efforts from Beijing to spur the post-pandemic recovery. The data also showed that retail sales growth was at a near 2-year high in March, industrial output rose the most in 5 months, and surveyed jobless rate fell to its lowest in 7 months.
"The decline in the profits of industrial companies is still relatively large, and the losses of companies are still high," NBS said after the publication of industrial profit data, adding that producer deflation also persists, which is a sign that factories cannot raise prices, which reduces their profits.
According to the report, in the 1st quarter, the profit of foreign companies fell by 24.9% per annum after a decrease of 35.7% per annum in the first two months of 2023. The decline in the profits of private companies accelerated to 23% per annum from 19.9% per annum, while the profits of private firms decreased by 16.9% per annum after falling by 17.5% from January to February.
Among the 41 industries surveyed, 28 saw losses. The largest drop in profit was recorded in the petroleum and coal industry (-97.1%). Meantime, ferrous metal smelting and rolling processing turned from profit to loss.