Profits for China’s industrial firms shrank in April as slowing manufacturing activity halted the previous month’s surge, putting more pressure on policymakers to step up support for an economy hit by a bitter trade war with the United States.
Earnings at China’s key manufacturing sector have been declining since November last year, with the exception of March, as both domestic and global demand slackened.
Industrial profits dropped 3.7 percent year-on-year to 515.4 billion yuan ($74.80 billion) in April, partly due to a high base of comparison in the previous year, according to data published by the National Bureau of Statistics (NBS) on Monday. That compared with a 13.9 percent surge in March, which was the biggest gain in eight months.
Zhu Hong of the statistics bureau said in a statement the March results benefited from companies buying industrial goods ahead of a value added tax (VAT) cut. The firms then scaled back on purchases in April in a blow to profits.
For the first four months, industrial firms notched up profits of 1.81 trillion yuan, down 3.4 percent from a year earlier, compared with a 3.3 percent drop in the first quarter this year.
The contraction in profits was in line with the weak growth in industrial output in the January-April period. Weak fixed-asset investment has also stoked worries about demand as have new factory orders, which remained sluggish in April, while exports have fallen on a sharp drop in shipments to the United States.
China’s trade frictions with the United States escalated suddenly this month, reversing the apparent progress in dialogue seen earlier this year, as US President Donald Trump raised tariffs on $200 billion worth of Chinese goods and threatened to slap tariffs of up to 25 percent on another $300 billion Chinese imports.