July saw industrial profit slide

Updated 2017-08-28 09:30:50 Global Times

Although industrial profits saw slower growth in July, this is a normal phenomenon following the soaring growth in the first quarter, and the slowing trend is expected to continue in the coming quarters amid steady product prices and weaker demand, experts noted.

The total profits earned by national industrial companies reached 4.25 trillion yuan (9.43 billion) from January to July, up 21.2 percent year-on-year, but 0.8 percentage points less than the growth seen in the January-June period, data from the National Bureau of Statistics (NBS) showed on Sunday.

In July, the industrial profits increased by 16.5 percent year-on-year, 2.6 percentage points less than the growth seen in June, according to the NBS.

He Ping, an official with the NBS, said in a statement on Sunday that July's slowing pace was due to short-term non-economic factors such as some companies halting their business as they were affected by the extremely high temperatures.

"The slower growth of industrial profits was mainly due to the reduced prices of industrial products compared with the hikes seen in the first quarter," Liu Xuezhi, a senior analyst at Bank of Communications, told the Global Times on Sunday.

As represented in the falling producer price index (PPI), which measures the prices of goods at the factory gate, the May-July period saw a year-on-year growth rate of 5.3-5.5 percent, down from over 7.5 percent in the first quarter, data from the NBS showed.

Restricted by the steadying prices and tepid demand, as well as the cooling of the once-sizzling property market under stricter government regulations, the slowing trend is likely to continue in the second half of this year, Liu forecasted.

Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology told the Global Times on Sunday that the price hikes in heavy chemical industries earlier this year were partly due to moves to cut capacity and reduce stock since the end of last year, and it will be hard to maintain the same growth trend in the coming quarters.

Profits made by China's State-owned enterprises were up 44.2 percent to 927.4 billion yuan in the January-July period, compared with a 45.8 percent rise in the first half, according to the NBS.

"In the new normal economic environment, with supply-side structural reform progressing, it's crucial for enterprises to take the opportunity to step up efforts to transform and upgrade themselves," Dong also suggested.

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