Profits of China's industrial firms rise for fourth straight month

Growth in August was helped by commodities prices and a rebound in exports

A worker cuts an oil pipe at a factory in Qingdao in China. The world's second largest economy continued to recover from the impact of the coronavirus pandemic. AFP 

Profits at China's industrial firms grew for the fourth straight month in August, buoyed in part by a rebound in commodities prices and equipment manufacturing, the statistics bureau said on Sunday.

China's recovery has been gaining momentum as pent-up demand, government stimulus and surprisingly resilient exports propel a rebound.

Industrial firm profits grew 19.1 per cent year-on-year in August to 612.81 billion yuan ($89.8bn/Dh329.56bn), the statistics bureau said.

That compares with a 19.6 per cent increase in July and is the fourth straight month of profit growth.

However, industrial firms' profits still face external pressures as rising tensions between Washington and Beijing cloud the global trade outlook.

Raw material manufacturing profits increased by 32.5 per cent in August, up from 14.7 per cent in July, according to Zhu Hong, an official at the statistics bureau. This was driven in part by a rebound in the prices of international commodities such as crude oil and iron ore, he added.

Meanwhile, profits of the general equipment manufacturing sector rose 37 per cent in August from the same period last year, with electrical machinery up by 13.3 per cent over the same period.

Economic indicators in August, ranging from exports to producer prices and factory output, all pointed to a further pickup in the industrial sector.

However, factory activity grew at a slower pace with smaller firms facing sluggish market demand and financial strain.

The country has introduced a slew of measures to kick-start the economy, from tax and fee reductions to grace periods for the calling in of debt.

China's economy may stagnate if it fails to lift the value chain, as it faces increasing competition from countries with advanced technologies and lower labour costs, economists warned.

Authorities have pledged to boost investment in strategic industries including core tech sectors such as 5G, artificial intelligence and semiconductors, and accelerate new material development to ensure stable supply chains.

For the January to August period, industrial firms' profits fell 4.4 per cent from a year earlier to 3.72tn yuan.

Liabilities at industrial firms rose 6.6 per cent -year-on-year at the end of August, edging higher than the 6.5 per cent at the end of July.

Earnings at state-owned industrial firms were down 17 per cent on an annual basis for the first eight months of the year, versus a 23.5 per cent decline in the first seven months.

Private-sector profits fell 3.3 per cent in the January to August period, narrowing from January-July period's 5.3 per cent fall.