China’s industrial profits rebound in June on easing of COVID curbs
Profits at China’s industrial firms bounced back to growth in June, bolstered by the resumption of activity in major manufacturing hubs, but worries about a COVID-19 resurgence have cast a shadow over future factory output.
Profits in June grew 0.8 per cent from a year earlier, rebounding from a 6.5 per cent decline in May, according to data released by the National Bureau of Statistics (NBS) on Wednesday.
Buoyed by easing pandemic curbs and government stimulus, June’s data shows industrial firms are gradually coming back from painful supply chain disruptions in the second quarter.
As the pandemic was effectively controlled and the industrial chain further recovered, industrial firms’ efficiency improved markedly, NBS Senior Statistician Zhu Hong said in a statement.
China’s economy braked sharply in the Apriljune quarter, highlighting the colossal toll on activity from widespread lockdowns that hit domestic consumption and business confidence.
Industrial firms saw their combined profits rise 1 per cent to 4.27 trillion yuan ($631.1 billion) in January-june from the same period a year earlier. That matched the 1.0 per cent growth pace in the first five months, the data showed.
Liabilities at industrial firms jumped 10.5 per cent at end-june, also remaining the same as the 10.5 per cent growth as of end-may.
In June, China’s industrial output grew 3.9 per cent from a year earlier, while factory-gate inflation hit a 15-month low as the country continues to buck the global trend of accelerating prices.
Factory activity in the Shanghai region has gradually recovered from a two-month citywide COVID-19 lockdown. Tesla achieved its highest monthly output at its Shanghai plant in June since it opened in 2019.
However, risks of a COVID resurgence and the return of strict measures to stamp out infections across the country pose challenges to factory production and recovery in the world’s secondlargest economy.
The Chinese tech hub of Shenzhen told 100 major companies including iphone maker Foxconn to set up “closed-loop” systems as it batles COVID-19, according to a document atributed to the local government on Monday.
Earlier this month, the port city of Tianjin, home to factories linked to Boeing and Volkswagen, as well as Lanzhou city of Gansu province and coastal city of Beihai in Guangxi tightened COVID restrictions to fight new outbreaks.
Meanwhile, policymakers are scrambling to avert other problems such as a debt crisis in the property sector from spilling into the broader economy in a politically sensitive year.
The official growth target of around 5.5% for this year will be hard to achieve without doing away with Beijing’s strict ZERO-COVID strategy, analysts say. A Reuters poll has forecast 2022 growth will slow to 4%.
China gross domestic product in the second quarter grew a tepid 0.4% from a year earlier the weakest showing since a 6.9% contraction in the first quarter of 2020 due to the initial COVID shock.
The industrial profit data covers large firms with annual revenues of over 20 million yuan from their main operations.
Meanwhile China’s clean energy transition will continue despite the challenges to global energy security posed by the conflict in Ukraine and a return to coal in Europe, and it remains on track to meet its carbon goals, energy officials said on Wednesday.
The world’s top energy consumer and greenhouse gas emiter has been trying to strike a balance between its commitments to bring emissions to a peak by 2030 and its need to guarantee energy supplies and rejuvenate its economy.
But China is still poised to expand the share of non-fossil fuel energy in overall consumption by an average of one percentage point a year between now and 2030, said Zhang Jianhua, director of the National Energy Administration, at a news conference in Beijing.
“Under the tight energy supply conditions last year and the restarting of coal power in many European countries, the development of nonfossil fuel energy in our country has continued unabated,” Zhang said.
Non-fossil fuels, including wind, solar, nuclear and hydropower, supplied 16.6 per cent of China’s total energy needs last year, up from 15.9% a year earlier.
As the Ukraine war upended global energy markets, sending prices of natural gas and thermal coal to record highs, China has repeatedly stressed the importance of energy security, raising concerns it could backslide on climate goals.
China aims to start cuting coal use starting from 2026, with President Xi Jinping saying in March that China could not simply “slam the brakes” on consumption.
Officials told reporters on Wednesday that major utilities now held record thermal coal inventories of 170 million tonnes, an increase of 52% on year, with the government promising that their botom line would be “no power cuts”. A wide swathe of China suffered outages last year.
Profits in June grew 0.8 per cent from a year earlier, rebounding from a 6.5% decline in May