Industrial firms in China saw its profits shrink at the fastest pace in more than eight months’ time in October. This was expected due to the drop in producer prices and the sustained slow momentum of the export sector in the world’s second-largest economy.
On a year-to-year basis, the industrial profits fell by 9.9% to 427.56 billion Yuan or $60.74 billion dollars. This was the biggest drop since the drop in the January-February period. The data was industrial data was released by the National Bureau of Statistics on Wednesday.
China’s industrial sector has been slowing down ever since the trade war with the US began. The country’s export manufacturing sector was hit because of tariffs set by the US on Chinese goods. Although China responded by setting tariffs on US products and hoping that the national demand will make up for it. But that didn’t seem to have happened as the national demands of industrial goods have also reduced in China.
Nie Wen and economist at Shanghai-based Hwabao trust said that the industrial sector was facing problems from both ends due to falling prices and due to higher funding costs. He further said that the profit is expected to stay on the negative side for quite some time in the near future and we should see the government come out with growth-boosting schemes in a gradual way.
For January to October period profit margins decreased by 4.9% compared with a 3.9% drop in the first nine months of 2019. The mining sector also saw its growth slowing down.
In the previous year, the industrial firms’ margins had reduced by 2.9% to 5.02 trillion Yuan. Due to the weakening of the prices of the raw materials the Chinese producer index fell to a record high in the last three years. Export sector had seen its profits reduce for the seventeenth consecutive month.
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