China’s industrial profits fall for second month amid price wars
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Beijing has pledged tougher regulations for industries engaged in cut-throat competition.
PHOTO: AFP
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BEIJING – China’s industrial earnings fell for a second straight month, with the authorities set to intensify their drive to rein in excessive competition that is dragging down prices and compounding the pain from US tariffs.
Profits at China’s industrial firms fell 4.3 per cent in June from a year earlier, following a decline of 9.1 per cent in May, while first-half profits were down 1.8 per cent versus a slide of 1.1 per cent in the period from January to May, National Bureau of Statistics data showed.
China’s economy slowed less than expected in the second quarter in a show of resilience to US tariffs.
But punishing price wars among producers have prompted Beijing to pledge tougher regulations for vehicles and solar panels, among other industries engaged in cut-throat competition – dubbed “involution” in China.
As China faces a complex and changing external environment, it must deepen the formation of a “unified national market, expand and strengthen domestic circulation and promote high-quality development of the industrial economy”, said bureau statistician Yu Weining.
Soochow Securities chief economist Lu Zhe said industrial profits may improve, as China’s actions against self-destructively fierce competition and a government trade-in scheme – a version of a “cash for clunkers” programme – should help control the price war among companies and expand consumer demand.
Factory-gate deflation deepened in June to its worst in almost two years, as softening domestic demand worsened overcapacity woes.
State-owned automakers Guangzhou Automobile Group and JAC Group expect to post their biggest ever second-quarter losses in August.
China’s leaders pledged in July to ramp up efforts to regulate aggressive price-cutting, fuelling expectations that a fresh round of industrial capacity cuts might be approaching.
But analysts say this round of supply-side reforms will not pull China out of deflation as quickly as a decade ago, citing challenges such as job losses.
State-owned firms recorded a 7.6 per cent decline in profits in the first half. Private sector companies reported a rise of 1.7 per cent, while foreign firms logged a 2.5 per cent gain, the data showed.
Industrial profit numbers cover firms with annual revenue of at least 20 million yuan (S$3.6 million) from their main operations. REUTERS, BLOOMBERG
