China’s industrial profit fell 17.8% from the year before in August, indicating growing concern over the slowdown of the economy.
This sharp drop, announced by the National Bureau of Statistics last Friday, follows a short recovery that occurred in July, when profit grew 4.1% on an annual basis — at the fastest rate in the past five months.
The drop in the price of oil highlights China’s significant economic challenges: slowing domestic demand, an extended housing crisis and a rising rate of unemployment.
In the first eight-month period of 2024 the profits for large industrial companies grew only by 0.5%. They reached 4.65 trillion Yuan ($663,47 billion), which is a significant decrease from the growth rate reported during the first seven months.
Beijing set a 5% GDP target for the full year earlier in 2018. This recent slowdown is raising concerns about China’s ability to achieve this goal.
China has responded to economic challenges by taking steps to boost growth.
Top officials including President Xi Jinping stressed the importance of halting the decline in the real estate market and increasing fiscal and monetary assistance on Thursday.
People’s Bank of China has cut the Reserve Requirement Ratio (RRR), the required amount of cash that banks are required to hold, by 50 basis point.
To inject liquidity in the market, the central banks also lowered its reverse 7-day repurchase rates by 20 basis point to 1,5% from 1.7%.
China’s retail sales and urban investments are not growing as fast as expected, according to the latest data.
In August retail sales were up just 2%, while the industrial production was up 4.5% from a year earlier.
In August, the real estate market dropped 10.2%, continuing its downward trend from July.
In the city, unemployment rose slightly to 5,3% from 5,2% last month.
A combination of weaker consumer spending, an unstable property market and increasing unemployment creates a difficult environment for China’s industrial sector.
Investors and analysts are closely monitoring signs of improvement or further decline in the next few months as Beijing intensifies its efforts to stabilize the economic situation.
The Daily Hodl published the following article: China’s Industrial Profits Fall 17.8% in August Due to Weak Economic Growth and Property Slump.
