BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/42
In addition to falling producer prices, the profits of Chinese firms have been hurt recently by the slide in stock prices and exchange rate shifts. The National Bureau of Statistics reports that profits of large industrial firms were down 2 % y-o-y in the first eight months of the year. Profits of state-owned enterprises declined, while profits of privately held industrial firms increased by 7 %. Profits of companies operating in the mineral extraction sector were hardest hit, down by half from a year earlier. Profits were up, however, for manufacturers and utility providers of electricity, water and natural gas. Growth in corporate revenues overall slowed. The average profit margin for industrial firms (profit-to-revenue ratio) was 5.4 % in the first eight months of the year, or about the same as in the first eight months of 2014.
Much of the drop in producer prices reflects excess capacity and overproduction in many sectors, as well as drops in prices of energy and raw material inputs. China is not alone in struggling with this set of problems. Also several other emerging economies in Asia have witnessed declines in producer prices and corporate profits. August producer prices were down in e.g. South Korea (-4 % y-o-y), Thailand (4 %), Malaysia (5 %), the Philippines (-8 %) and India (wholesale prices 5 %).