Beijing’s efforts to rein in aggressive pricing strategies are showing some results, reflected in smaller declines in factory-gate prices
[BEIJING] China’s industrial profits returned to growth in August even as businesses braced for a broader economic slowdown amid persistent demand woes.
A government crackdown on cost competition helped ease producer deflation last month, but missed economic forecasts have kept pressure on policymakers to bolster growth.
Industrial profits rose 20.4 per cent in August from a year earlier, reversing a 1.5 per cent year-on-year decline in July, while profits grew 0.9 per cent in the first eight months compared to a 1.7 per cent decline in the January to July period, National Bureau of Statistics (NBS) data showed on Saturday (Sep 27).
Intense competition in autos, solar and other key industrial sectors, where relentless price wars have been relied on to outsell rivals, has taken a toll on business margins.
Electric vehicle maker BYD saw quarterly profit fall for the first time in three-and-a-half years.
Beijing’s efforts to rein in aggressive pricing strategies are showing some results, reflected in smaller declines in factory-gate prices. However, a solid recovery in demand remains elusive amid a prolonged housing downturn and weak labour market conditions.
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Both factory output and retail sales in August posted their weakest gains since last year.
Chinese policymakers have refrained from major stimulus measures, balancing economic support against concerns about fuelling a hot stock market. Rate cuts by the US Federal Reserve, however, could give the People’s Bank of China room to ease policy without risking capital flight or yuan depreciation.
State-owned firms saw profits fall 1.7 per cent in the first eight months. Private-sector firms posted a 3.3 per cent increase while foreign firms booked a 0.9 per cent rise, the data showed.
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Industrial profit figures cover firms with annual revenue of at least 20 million yuan (S$3.6 million) from their main operations. REUTERS
