Major Chinese industrial firms – those with an annual business turnover of at least CNY20 million – posted a 66.9% gain in first-half earnings, and an average annual growth of 20.6% over the past two years. China's industrial production recovered steadily in the first half of the year, with corporate operations recording continuous improvement and growing profits, the National Bureau of Statistics (NBS) said. Over 70% of major industries reported profit levels higher than in the pre-Covid-19 period. Mining and raw materials reported remarkable profit growth, surging 133% and 183% year-on-year, respectively. The profit of advanced manufacturing companies rose 62%, while for consumer goods manufacturers the growth rate was 38.6%. High-tech firms and equipment manufacturers, as well as new-energy vehicle (NEV) manufacturers also reported increased profits.
“Private and smaller companies posted a comparatively slower recovery," Zhu Hong, Senior Statistician at the NBS, said. Surging bulk commodity prices put rising cost pressure on downstream firms, and there were weaknesses in the industry and supply chains, Zhu added. Total profit of China's industrial enterprises will maintain double-digit growth, given the nation's relatively relaxed monetary and fiscal policies and buoyant export markets, Tian Yun, former Vice Director of the Beijing Economic Operation Association, told the Global Times. China's central bank announced a reserve requirement ratio (RRR) cut of 50 basis points for eligible financial institutions from mid-July to support the real economy, through which CNY1 trillion in long-term funds will be released.
Wang Tao, Chief China Economist with UBS Investment Bank, said China’s fiscal policy is expected to ease compared with the first half, with local government bond issuance accelerating and fiscal expenditure picking up speed. A more proactive fiscal policy will help shore up infrastructure investment and buffer the rising downside risks brought by lingering uncertainties surrounding Covid-19 that could inhibit the recovery in consumption, as well as a possible softening in export growth, Wang said. According to Wang, even with moderate fiscal support in the coming months, the Chinese economy is still expected to grow by about 8.5% for the full year, far above the government’s minimum target of 6%.
