China's industrial profit growth accelerates in June

China’s industrial profits rose for a second straight month and at the fastest pace in more than a year, indicating continued momentum in the country's recovery from the COVID-19 crisis.

June profits for China’s industrial firms soared 11.5 percent year on year to 666.55 billion yuan (US$95.18 billion), clocking the fastest growth rate since March 2019, according to the country’s National Bureau of Statistics (NBS).

May’s growth of 6 percent marked the first monthly gain in industrial sector earnings since November, before the outbreak of the novel coronavirus.

NBS senior statistician Zhu Hong said that “quickened industrial production and sales and a moderate drop in producer prices drove up industrial profits.”

Industrial production for June increased by 4.8 percent year on year, 0.4 percentage points faster than May and producer prices fell 3 percent year on year, narrowing 0.7 percentage points from May.

Industrial firms’ costs in June declined by 22 yuan for every 10,000-yuan revenue as cost pressure alleviated. Due to fluctuations in oil prices, the petroleum-processing industry’s costs were cut by 713 yuan for every 10,000-yuan revenue.

Of note, key industries such as steel, oil and gas extraction, oil refining and non-ferrous metals saw significant improvements in profit in June with demand improving and manufacturing costs easing.

On a quarterly basis, industrial profits increased to 4.4 percent in the second quarter, rebounding from a slump of 36.7 percent in the first quarter.

But Zhu warned that “as demand remained weak amid the COVID-19 pandemic and the international trade situation is complex and severe, uncertainty still remains over the sustainability of industrial profits.”

For the first half year, industrial profits fell 12.8 percent. Earnings of state-owned industrial firms were down 28.5 percent year on year for the first six months, after slumping 39.3 percent in January-May; while those of private companies fell 8.4 percent year on year to 711.98 billion yuan.

Industrial profit data released by the NBS covers large firms with annual turnover of at least 20 million yuan.