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China’s producer prices have skyrocketed since 2008, reducing profits

A worker checking the roll of an aluminum plate at a factory in Wuhan, China.

STR | AFP | Getty Images

Beijing-China’s producer price index in May rose 9% year-on-year in May due to soaring commodity prices, the National Bureau of Statistics said Wednesday.

According to Wind Information, this is the fastest increase in production costs since September 2008, when the index rose 9.13%.

According to a Reuters poll, the rate of increase was 8.5% higher than expected, but the rate of increase comes from a low level. The index fell 3.7% in May 2020 during the first months of the coronavirus pandemic.

Rising raw material prices, as well as steel, are of particular concern to companies in the building materials business, said Gan Jie, professor of finance and academic director of the MBA program at Cheung Kong Business School in Beijing.

“These companies are more pessimistic. They are seeing a significant rise in costs and expect to continue until the end of the year,” she said Wednesday, with other companies expecting prices to normalize sooner. This is based on a survey of more than 2,000 Chinese companies in the industrial sector conducted by her team last week.

First surveys conducted in late March and April found that business sentiment in the first quarter remained unchanged from the previous quarter. However, the study found that the percentage of companies reporting gross margins of less than 15% increased to about 70%.

“They’re certainly under pressure,” Gunn said. “Some companies even say they can’t accept orders now because the more they produce, the more they lose. The net profit is negative.”

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In recent weeks, the Chinese central government has announced: Additional support for SMEsEspecially those affected by rising raw material prices.

According to CNBC’s translation, the impact on small and medium-sized enterprises is “quite significant,” Deputy Minister of Industry and Information Technology Wang Jiangping told reporters in Mandarin last week.

He said the operating margin of 6 percent in the first four months of the year was 2 percentage points lower than that of large corporations, and the gap is widening.

Prices rose 99.1% in China’s oil and gas extraction industry and 34.3% in oil, coal and other fuel processors, according to a data release on Wednesday.

Meanwhile, consumer costs have risen slightly. The Statistics Bureau announced on Wednesday that the consumer price index in May rose 1.3% year-on-year, disappointing a 1.6% rise.The index is Pork price drop, Following the surge over the last two years.

Trade war concerns

Chinese manufacturers are also facing pressure from the expected decline in overseas purchases. The surge in exports, driven by global demand for face masks and other health-related products, boosted the Chinese economy during last year’s coronavirus pandemic.

Companies are currently absorbing costs and not reducing headcount, Gunn said. But she said Chinese manufacturers are expecting. Orders from overseas decreased slightlyEven if overseas demand will not change much in the end.

“In general, people are uncertain about what’s happening abroad,” she said. One is the new coronavirus infection, and the other is the trade war and overall sentiment towards Chinese businesses. ” Said.

Tensions between China and its largest trading partner, the United States, have escalated over the past three years as both countries have imposed tariffs on the other product. China’s exports to the US in May increased month-on-month, Imports decreased..

In addition, a large investment agreement between China and Europe, which was close to closing at the end of last year Not likely to be completed Due to sanctions imposed by both sides on alleged human rights violations.

China’s producer prices have skyrocketed since 2008, reducing profits

Source link China’s producer prices have skyrocketed since 2008, reducing profits

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