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China’s Industrial Profits Drop Significantly in August
Excavators transfer coal at the coal terminal in China’s eastern Jiangsu province on January 22, 2024.
According to the National Bureau of Statistics, China’s industrial profits saw a sharp decline of 17.8% in August compared to the same month last year. This downturn marks a notable reversal from the previous month, where profits had shown a positive increase of 4.1%, the fastest growth observed in five months.
The term “industrial profits” encompasses earnings from a range of sectors, including factories, mines, and utilities operating within China. For the first eight months of the year, profits from large industrial businesses registered a modest growth of 0.5%, totaling approximately 4.65 trillion yuan ($663.47 billion). This figure is a slight improvement compared to the 3.6% growth recorded in the prior seven-month period.
Amid growing concerns regarding the nation’s ability to meet its annual GDP growth target of around 5%, the Chinese government has intensified initiatives aimed at bolstering economic stability. Factors such as weak domestic consumption, an ongoing downturn in the real estate market, and rising unemployment rates have continued to challenge the economic landscape of the world’s second-largest economy.
In response to the economic slowdown, top Chinese officials convened a high-level meeting led by President Xi Jinping on Thursday, urging decisive actions to address the downturn in the property sector and enhance both fiscal and monetary policy support.
On Friday, the People’s Bank of China announced a reduction in the reserve requirement ratio (RRR) for banks by 50 basis points, effectively lowering the amount of cash banks must retain. Additionally, the central bank decreased the 7-day reverse repurchase rate from 1.7% to 1.5%, a move that follows prior commentary from the central bank’s governor, Pan Gongsheng, during a press conference earlier in the week.
Economic indicators from August revealed a slowdown in key metrics, including industrial activity, retail sales, and urban investment. Retail sales exhibited a meager increase of just over 2%, while industrial production growth reached 4.5% on a year-over-year basis. Real estate investments fell sharply by 10.2% through August, maintaining the same rate of decline seen in July. Furthermore, the urban unemployment rate experienced a slight rise, moving from 5.2% in July to 5.3% in August.
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