China's professional profit growth slows amid high raw material prices
Profit growth at China's commercial companies slowed again in May as surging raw material prices squeezed margins and weighed on factory activity.
Profits at China's commercial organizations rose 36.4per cent in May from a year earlier to 829.92 billion yuan (US$128.58 billion) official data showed on Sunday.
That was a slowdown from the 57per cent surge reported in April, according to National Bureau of Statistics.
The world's second-largest economy has largely recovered from disruptions due to COVID-19, nonetheless it faces new challenges such as for example elevated raw material costs and global supply chain crunches. Officials warn that China's recovery remains uneven.
Imbalances in profitability became prominent between upstream and downstream organizations because of high commodity prices, said Zhu Hong, an official at the statistics bureau.
"The building blocks for recovery isn't yet solid," he said in a statement accompanying the data.
Profits grew rapidly in the metals, chemicals and petroleum sectors, while smaller and downstream enterprises saw a lot more pressure, Zhu said.
For the January-May period, industrial firms' profits grew 83.4per cent from the same period a year earlier to 3.42 trillion yuan.
Factory-gate inflation saw its quickest gross annual growth in over 12 years in May driven by surging commodity prices, posing risks to profit margins for mid- and downstream firms.
Chinese policymakers have stepped up efforts in recent weeks to cool runaway metals prices, including selling supplies from state reserves, but with global demand continuing to recuperate some analysts believe the moves could have only a restricted impact.
China's official manufacturing data this week is likely to show weaker growth in activity in June, likely because of disruptions caused by COVID-19 flare-ups at the country's major southern ports. In addition, investors will be seeking to trends in input costs and prices for any further signs of margin pressure.
Liabilities at industrial organizations were up 8.2per cent year-on-year towards the end of May, versus 8.6per cent growth per month earlier.
The professional profit data covers large companies with gross annual revenues of over 20 million yuan from their main operations.
Source: www.channelnewsasia.com
