PROFIT growth at China’s industrial firms slowed for a sixth month as plants fought off high commodity prices, COVID-19 outbreaks and part shortages, with an unfolding power crisis a growing threat to output and bottom-lines.

Profits rose 10.1 percent year on year in August to 680.3 billion yuan (US$105 billion), compared with a 16.4 percent gain in July, data from China’s statistics bureau showed yesterday.

China rapidly recovered from a pandemic-induced slump last year, but momentum has weakened in recent months, with its vast manufacturing sector facing heightened costs and production bottlenecks, and more recently, electricity rationing.

Factory output rose in August at its slackest pace since July 2020, weighed by domestic COVID-19 outbreaks, high raw material prices, and a persistent shortage of parts such as chips.

A sustained crackdown this year on real estate speculation and new borrowing by developers for projects has also sapped demand for construction-related goods and services.

High commodity prices in recent months have hurt the profitability of many medium-sized and downstream factories.

To cool prices, China will auction more industrial metals from its State stockpiles next month in a rare release of inventories. Prior to this year, China had not sold off State metal reserves for more than a decade.

Earlier this month, China also released crude oil from its strategic reserves for the first time.

New headwinds are also building as China’s efforts to meet carbon emissions goals lead to wider curbs on electricity use, particularly on energy-intensive plants and businesses.

For the January-August period, industrial firms’ profits rose 49.5 percent year on year to 5.61 trillion yuan, slowing from a 57.3 percent increase in the first seven months of 2021.

Liabilities at industrial firms rose 8.4 percent on an annual basis at end-August, up from 8.2 percent growth as of end-July.

The industrial profit data cover large firms with annual revenues of over 20 million yuan from their main operations. (SD-Agencies)