PROFIT growth at China’s industrial firms slowed for the fourth straight month in June, as high raw material prices weighed on factories’ margins, pointing to some weakness in the recovery of the world’s second-biggest economy.

Industrial firms’ profits rose 20 percent year on year in June to 791.8 billion yuan (US$122.27 billion), data from the National Bureau of Statistics (NBS) showed yesterday, after a 36.4 percent increase in May.

The Chinese economy has largely recovered from disruptions caused by the coronavirus pandemic, but it has faced new challenges in recent months such as higher raw material costs and global supply chain crunches.

“The unevenness in the recovery of corporate profitability still exists, with private firms and small businesses facing a slow rebound,” said Zhu Hong, a senior statistician at the National Bureau of Statistics.

“Commodity prices continue to stay at high levels, squeezing the profitability of firms, and there are still weak points in supply chains and industrial chains.”

In the first half of 2021, industrial firms’ profits grew a hefty 66.9 percent from a pandemic-induced slump in the same period a year earlier. Profits in the January-June period increased 45.5 percent from the same period in 2019, before the global pandemic started.

“The profit margin of upstream industrial enterprises improved further while downstream profit margin edged down slightly,” said analysts from Goldman Sachs in a note.

China’s factory activity slowed in June on a resurgence of COVID-19 cases in Guangdong, with epidemic prevention and control efforts curbing port processing capacity.

Metals processing, as well as chemicals and pharmaceuticals industries, drove profit growth in June, according to NBSt data.

(SD-Agencies)