China’s Industrial Sector Maintains Strong Momentum in August

China’s industrial sector continued to show strong signs of recovery from the coronavirus pandemic, as profits of major industrial firms rose by 28.2% year-on-year in August. This was the fifth consecutive month of growth and an acceleration from the 19.6% increase in July.

The growth was driven by a recovery in market demand, improved industrial production, and reduced costs and expenses. The profits of major industrial firms reached 711.18 billion yuan ($110.72 billion) in August, up from 589.5 billion yuan in July.

The industrial profit data covers large firms with annual revenue over 20 million yuan from their main operations.

China’s Industrial Sector Maintains Strong Momentum in August
China’s Industrial Sector Maintains Strong Momentum in August

Equipment manufacturing and electrical machinery lead the way

Among the 41 industries surveyed, 29 posted year-on-year profit growth in August, while 12 reported declines. The sectors that saw the most profit growth were equipment manufacturing, electrical machinery, and non-metallic mineral products.

Equipment manufacturing profits increased by 40.3% year-on-year, while electrical machinery profits rose by 37.1%. Non-metallic mineral products, which include cement, glass, and ceramics, saw their profits surge by 72.2%.

These sectors benefited from the government’s stimulus measures to boost infrastructure spending and support the construction industry.

Profit margins improve as costs and expenses decline

Another factor that contributed to the profit growth was the decline in costs and expenses for industrial firms. The data showed that the costs per 100 yuan of revenue dropped by 0.25 yuan year-on-year in August, while the expenses per 100 yuan of revenue fell by 0.64 yuan.

As a result, the profit margin of industrial firms rose to 6.04% in August, up from 5.11% in July and 4.5% in August 2022.

The improvement in profit margins reflected the recovery in industrial production and sales, as well as the easing of price pressures and inventory burdens.

Outlook remains positive amid challenges

The industrial profit data is the latest indicator of China’s economic resilience amid the global turmoil caused by the pandemic. China was the first major economy to emerge from the lockdowns and resume growth in the second quarter of 2023.

The outlook for the industrial sector remains positive, as the official manufacturing Purchasing Managers’ Index (PMI) stayed above the 50-point mark that separates expansion from contraction for the eighth month in a row in September.

However, some challenges still remain, such as the uncertain external environment, the uneven recovery across sectors, and the potential risks of a resurgence of the virus.

The National Bureau of Statistics, which released the industrial profit data, said that the industrial sector still faces “many difficulties and uncertainties” and urged more efforts to consolidate the recovery and ensure stable and high-quality development.

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