BEIJING — Profit growth at China's industrial
firms slowed again in May as surging raw material prices squeezed margins and
weighed on factory activity.
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Profits at China's industrial firms rose 36.4 percent in May
from a year earlier to 829.92 billion yuan ($128.58 billion) official data
showed on Sunday.
That was a slowdown from the 57 percent surge reported in
April, according to National Bureau of Statistics.
The world's second-largest economy has largely recovered
from disruptions caused by COVID-19, but it faces new challenges such as
elevated raw material costs and global supply chain crunches. Officials warn
that China's recovery remains uneven.
Imbalances in profitability became prominent between
upstream and downstream firms due to high commodity prices, said Zhu Hong, an
official at the statistics bureau.
"The foundation for recovery is not yet solid," he
said in a statement accompanying the data.
Profits grew rapidly in the metals, chemicals and petroleum
sectors, while smaller and downstream enterprises saw much more pressure, Zhu
said.
For the January-May period, industrial firms' profits grew
83.4 percent from the same period a year earlier to 3.42 trillion yuan.
Factory-gate inflation saw its fastest annual growth in over
12 years in May driven by surging commodity prices, posing risks to profit
margins for mid- and downstream firms.
Chinese policymakers have stepped up efforts in recent weeks
to cool runaway metals prices, including selling supplies from state reserves,
but with global demand continuing to recover some analysts believe the moves
will have only a limited impact.
China's official manufacturing data this week is expected to
show weaker growth in activity in June, likely due to disruptions caused by
COVID-19 flare-ups at the country's major southern ports. In addition,
investors will be looking to trends in input costs and selling prices for any
further signs of margin pressure.
Liabilities at industrial firms were up 8.2 percent
year-on-year at the end of May, versus 8.6 percent growth a month earlier.
The industrial profit data covers large firms with annual
revenues of over 20 million yuan from their main operations.
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