China’s industrial profits grow for fourth straight month

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% year-on-year in August to 612.81 billion yuan ($89.8 billion), the statistics bureau said.

That compares with a 19.6% 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% in August, up from 14.7% 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 notched up 37% in August on-year, with electrical machinery up by 13.3% 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 strains.

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 rise up 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 January-August, industrial firms’ profits fell 4.4% from a year earlier to 3.72 trillion yuan, better than the 8.1% decrease in the first seven months.

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

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

Private-sector profits fell 3.3% in January-August, narrowing from January-July’s 5.3% fall.