BEIJING (Reuters) – China’s industrial profits grew faster in June as a fragile economic recovery and weakening consumer sentiment left businesses struggling, official data showed on Saturday.
Profits rose 3.6 percent year-on-year last month, following a 0.7 percent increase in May, while first-half profits rose 3.5 percent, accelerating from a 3.4 percent increase in the first five months of the year, according to data from the National Bureau of Statistics (NBS).
“Since the second quarter, a combination of relatively fast growth in industrial production and a significantly slower rate of decline in ex-factory prices has fostered a steady recovery in corporate profits,” Wei Ning, a statistician at the National Bureau of Statistics, said in a separate statement.
“However, it should also be recognized that a lack of effective domestic demand is restricting the continued improvement of corporate performance, and that the increasingly severe and complex international environment is putting increasing pressure on companies.”
The strong data contrasted with a weaker-than-expected economic slowdown in the second quarter, as a struggling jobs market and a long-term slump in the housing market weakened the consumer sector.
Of the more than 10 alcoholic beverage companies listed on the Chinese mainland that have announced first-half profit forecasts, roughly half expect to incur a loss in the first half of the year.
However, amid intensifying trade friction with Western countries, optical transceiver companies Sinokey Innolight Co. Ltd. and Suzhou TFC Optical Communication Co. Ltd., which supply optical transceivers to U.S. semiconductor giant Nvidia Corp. (NASDAQ:), expect their first-half profits to increase several-fold as the two companies are set to score major wins in the global artificial intelligence buildout.
China is seeking stronger monetary stimulus to shore up its fragile economy, surprising markets again on Thursday with an unexpected loan operation at significantly lower interest rates. Just days after authorities cut some benchmark lending rates following a meeting of top leaders that outlined other major reforms.
The country’s national planning authority and finance ministry announced plans on Thursday to raise about 300 billion yuan from ultra-long-term special treasury bonds to step up a nationwide equipment upgrade and consumer goods trade-in campaign.
A breakdown of the National Bureau of Statistics data showed state-owned enterprises saw their profits rise 0.3 percent in the first half of the year, foreign-invested companies increased 11 percent and private companies rose 6.8 percent.
The industry profit figure covers companies with annual revenue of at least 20 million yuan ($2.75 million) from their main operations.
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