China: the profits of public and private companies are falling, but why?
The Chinese economy continues to confirm the problems already noted in previous months, especially in the private sector, but without sparing the public sector, and the alarm signals continue to arrive.
In the first five months of 2023, profits of Chinese industrial enterprises fell 18.8% year-on-year to CNY 2,668.89 billion as the economic recovery stalled, weak demand and pressure on margins. The decline followed that of 20.6% in the previous period and that of 4% in 2022, with a contraction in profits both in state-owned enterprises (-17.7% compared to -17.9% in January-April) and in the private sector (-21.3% compared to -22.5%).
Among the 41 industrial sectors examined, 24 recorded losses: petroleum, coal and other fuels (-92.8%) , smelting and rolling of non-ferrous metals (-53.0%), chemicals (-52.4%) , computers, communications and electronic equipment (-49.2%), processing of agricultural and food products (-39.5%), textile products (-27.8%), non-metallic mineral processing products (-25, 9%), coal mining and washing (-18.7%), oil and natural gas extraction (-9.9%).
Here is the relative graph showing the decrease compared to the previous year:
We note the collapse of profits from the oil sector: the profit boom from processing cheap Russian oil is winding down very quickly. On the one hand, China discovers that it does not exist in perfect isolation, but in an interconnected world in which without external demand, internal demand is not enough. Except that, in this phase, it should more than anything else put pressure on Powell and Lagarde: with high interest rates, consumption and investments in the USA and the EU are falling, and the expensive dollar makes it difficult to borrow, and consume, even in African and Central countries -South America. Even if the Yuan is spreading as an international exchange currency (see Argentina), it is doing it too slowly.
Who knows whether Xi Jinping may give Washington and Frankfurt a call…
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The article China: the profits of public and private companies are falling, but why? comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/cina-cadono-gli-utili-delle-aziende-pubbliche-e-private-ma-perche/ on Wed, 28 Jun 2023 11:00:38 +0000.