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Floods and COVID cool China industrial profit growth

By Andreas Ismar

04:58, 27 August 2021

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Cars struck in flood waters in Chongqing, China
Cars stuck as the Yangtze River floods Chongqing, China - Photo: Shutterstock

Floods and COVID spread weigh on profit of China’s industrial estates in July, with earnings rising at slowest pace in seven months.

Industrial profit in July was up 16.4% year-on-year, slowing from 20% increase in June and compared with this year’s peak of 92.3% in April, according to government statistics. For the first seven months of the year, industrial firms’ earnings rose 57.3% year-on-year due to low base effect, easing from 66.9% increase in the first half.

Reuters cited Zhu Hong, senior number cruncher at China’s National Bureau of Statistics (NBS), cited sporadic COVID infections, flooding and high commodity prices as factors pressuring profitability. The original NBS statement is in Chinese language.

Challenging third quarter

The data released today further strengthened the view that recovery momentum in the world’s second-largest economy is losing steam following the spread of the more virulent Delta variant of the coronavirus and due to major floods in the country.

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Iris Pang, Greater China economist at ING, elaborating China’s recent woes: “In July, the major city of Zhengzhou [in Henan province] suffered from serious flooding. Zhengzhou is known for its smartphones and semiconductor production. The floods hit factory operations and intensified chip shortages…A month later, China suspended some sea and air freight around Shanghai due to a new breakout of COVID-19. This resulted in major congestion affecting the import of commodities and the exports of goods and parts.”

"Overall, profits at industrial firms above the designated size maintained a steady growth in July, but we have to recognise that the unevenness and uncertainty in the recovery of corporate earnings still exist," Reuters cited Zhu as saying.

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