China’s Industrial Profit Slump Dismaying but Expected

China reported a slump in its industrial profit. Contrary to the belief of many, the decline has been highly anticipated by economists.

Over the past months, the cost of raw materials globally hit a record high. This surge in costs poses a burden on businesses, which had to compensate for the ballooning inputs.

For May, profits from the country’s industrial entities jumped by 36.4%, translating to $128.58 billion in monetary terms. This is a considerable downgrade from the 57% hike incurred in April.

Nevertheless, economists remain positive about the actual results, given that the figures still stood at the expansion level. It shows that despite the ongoing risks in the macroeconomic environment, the country’s industrial sector remains steadfast. The same dilemma has been spotted in the East Asian nation’s manufacturing sector.

China’s Producer Price Index in May jumped by 9% year on year, carrying through the 6.8% hie hit in April.

The main driver of the recent surge remains high commodity prices. During the period, almost all precious and industrial metals topped headlines after hitting record highs.

Gold unprecedentedly ascended past the $1,800.00 an ounce threshold. Meanwhile, copper, an indispensable component in the industry, topped all charts in London, Shanghai, and New York.

Metals have entered what the market calls a “supercycle” since the beginning of the year. 

The increased appetite for these commodities, especially for economic rehabilitation and expansion purposes, led to demand outsmarting supply.

While significant price reductions have come to play in June, analysts noted that the metal market would remain hot for the time being.

China GDP Forecast, As Told by World Bank

Despite the risks, it is undeniable that China really gave a good run on spectators’ money during the pandemic. It is the only developed nation in the world that managed to return to expansion at a faster-than-anticipated rate than its counterparts.

The country is expected to carry through the positive momentum this year. Earlier this month, World Bank gave a China GDP growth forecast of 8.5% for 2021. This level will be the highest in the world for the year, should it comes to reality. For the record, the global economy is expected to expand by 5.6% this year. Some developing economies are expected to grow at an average of 6.0%.

The main driver for the growth remains the retail business, as the country houses the world’s biggest e-commerce retailers. These include JD.com, and Alibaba, among others.