After ending the sanitary restrictions that affected its economy, China is now impacted by the deterioration in world activity and the profits of its industrial firms plummeted 20.6% annually in the first four months of the year, according to the National Office of Statistics (ONE).
The slowdown in demand and the deflation in factory outlet prices were strongly felt in the finances of the manufacturers of the second world economy, falling 17.9% in the case of state-owned firms and 22.5% in the private ones.
In any case, in April, the last month of the period, the situation improved slightly: if only that month is considered, revenues increased 3.7% annually, after the decline of 19.2% in March.
In fact, if only the first quarter is taken into account, revenue fell 21.4% against 20.6% in the four months that began in 2023.
“The weak recovery in effective demand continued to weigh on the capacity utilization rate, which, along with the difficulty of cutting costs, requires industries to be more patient,” said Bruce Pang, China chief economist at at the JLL consultancy, to the Bloomberg news agency.
According to Pang’s outlook, industrial revenues will not return to positive territory “until the fourth quarter”, and he considered that more stimulus and expansionary policy from the Chinese government is needed to that effect.
Although the industries had a rebound in their activity after the lifting of the “zero-covid” policy, the international economic situation -on which it is highly dependent- affects the growth of exports, in addition to motivating the postponement of investments.
It also has consequences for outlet prices and margins: the producer or wholesale price index registered deflation of 3.6% in April, the biggest drop since May 2020, shortly after the start of the pandemic.
Geopolitics also plays a role as the United States and other Western powers seek to reduce their dependence on China for imports of some inputs.
Meanwhile, on the domestic side, consumption is still far from its potential and growth in recent months has been focused on services, rather than goods.
As an example, the revenues of Lenovo, a Chinese computer manufacturer and one of the most important in the world, fell 75% in the first three months of the year, a sign, in addition, of the slowdown in that sector in particular worldwide.
Another of the most affected sectors, according to data from the ONE, were the foundry and laminating companies of ferrous metals.
Beijing set an official growth target for this year of around 5% and the recovery after the restrictions of the first months of the year led banks, organizations such as the World Bank and analysts to revise their forecasts upwards.
However, some of the latter have already revised their forecasts downwards after a disappointing April in terms of economic data: Nomura and Barclays lowered their forecasts from 5.9% and 5.6% to 5.5% and 5, 3%, respectively.
Source: Ambito
