Chinese industrial profits return to growth

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Profits at China’s industrial companies returned to growth in April, highlighting Beijing’s efforts to boost manufacturing as other areas of the world’s second-largest economy struggle to regain momentum.

Industrial profits at businesses with more than Rmb20mn ($2.8mn) in turnover increased 4 per cent year on year in April after a decline of 3.5 per cent in March, according to the National Bureau of Statistics. So far this year, their profits are up 4.3 per cent, unchanged compared with the rate in the first quarter after a large jump at the start of the year.

The improved April data follows a rise in Chinese exports in the same month after a push from Xi Jinping’s government to boost “high-quality development” in manufacturing, which prompted complaints from western leaders over perceived overcapacity.

The EU is carrying out a probe into state support for Chinese electric vehicle production, while US President Joe Biden this month introduced 100 per cent tariffs on EV imports from China, where intense domestic competition has spurred a price war.

Recent economic data in China is being closely watched for further evidence of the government’s strategy as it grapples with a historic property sector slowdown and weak consumption. Exports in April grew 1.5 per cent year on year in dollar terms, while industrial production jumped 6.7 per cent.

Analysts at Goldman Sachs noted strong increases in profits across equipment manufacturing in the first four months, with profits in electronics and transportation equipment growing by 76 per cent and 41 per cent, respectively.

Yu Weining, statistician for the National Bureau of Statistics, also emphasised the contribution of equipment manufacturing and said market demand picked up in April, citing the impact of “macroeconomic policies”.

But Yu added that domestic demand remained “insufficient” and that the development of new productive forces — a widely used term in China for its recent focus on manufacturing — still needed to be “accelerated”.

State-owned companies’ profits dropped 2.8 per cent year on year in the first four months of 2024, the data showed, while profits at private groups rose 6.4 per cent and those at foreign businesses grew 16.7 per cent.