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Chinese Industrial Profit Grows for Sixth Consecutive Month, but Headwinds Remain

Published 27/11/2020, 03:03 pm
Updated 27/11/2020, 03:06 pm
© Reuters.

© Reuters.

By Gina Lee

Investing.com – Chinese industrial firms’ profits rose to CNY642.91 billion ($97.78 billion) in October, reflecting the manufacturing sector’s steady recovery from the impact of COVID-19.

Data released earlier in the day from the National Bureau of Statistics (NBS) showed a 28.20% increase in Chinese industrial profit year-on-year, a sixth straight month of growth. Profits rose by 10.10% in September.

Profits also rose 0.7% for the year-to-date, up from September’s 2.4% contraction.

Strong exports have driven an impressive recovery in the industrial sector from the lockdown imposed earlier in the year as COVID-19 cases spread. Chinese Premier Li Keqiang said on Tuesday that “we expect China’s economy will return to the proper range of development next year.”

“China’s macro policies will remain stable, effective, and sustainable,” Li added.

NBS accredited the growth to a low base in the same period last year and an increase in investment income in November. However, NBS economist Zhu Hong warned that profits could come under pressure going forward.

“We should note that the growth rate of industrial enterprises’ accounts receivable has risen, and the pressure on cash flow has increased, which bodes ill for the continuous recovery of companies’ production and operation,” Zhu said in a statement.

Other investors agreed.

“Looking ahead, we expect profits to remain strong in the coming quarter or two, though the pace of growth may slow. The recovery in household consumption and strong export performance should remain supportive, countering downward pressure from deflation in producer prices,” Bloomberg China economist David Qu told Bloomberg.

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