BEIJING, April 4 (TMTPOST) – Atable of theranking of cities in Jiangsu and Zhejiangcirculated on the Internetshowsthat 71% of the 21 prefecture-level cities experienced a year-on-year drop of more than 20%in industrial profitsof sizable industrial enterprises.
Among them, six citieswitnessed adecreaseof over 50%in their profits,such as Quzhou, whose profits fell by as sharplyas 68.2%.
The accuracy of the table is not confirmeddue to the lack of officialdata sources. The National Bureau of Statistics actually does not publish data on industrial revenues and profits in cities below the provincial level, and Zhejiang and Jiangsu provinces didn’t release their industrial profit data by city either. However, according to official data released by the National Bureau of Statistics, industrial profits in Jiangsu and Zhejiang did drop significantly in January and February 2023, i.e.25.8% and 48%,respectively. The decline in industrial profits in the two provinces wasworsethan the national average.Zhejiang’s economic situation, especially in the manufacturing sector, was even more severe, with lower growth in industrial value added and retail sales of consumer goods than thosein Jiangsu.
The declining industrial profits in Jiangsu and Zhejiang provinces wereindicative of China’s economic system and macroeconomic conditions. The main contributing factor to the decline wasthe sharp deterioration in exports, which wasnot unique to the two provinces but also observed in other traditionally large export regions like Shanghai, Guangdong, Fujian, and Shandong. The slowdown in overseas demand has resulted in a rapid fall in China’s exports. Among the top 10 provinces and municipalitiesin terms of exports, Zhejiang has the highest degree of reliance on exports, i.e.41.3%. Therefore, the revenues for Zhejiang enterprises werehittheworst.
Another contributing factor is the concentration of resources instate-owned enterprises. More resources havebeen allocated to state-owned enterprisesinrecent years, particularlyduring the post-pandemiceconomic reboundperiod from December 2022 to February 2023. An increase in resource allocation to state-owned enterpriseswould inevitably result in a decrease for the private sector. Zhejiang and Jiangsu host the largest numberof private enterprises in China, with Zhejiang having a larger proportion of private enterprises.
Withdomestic demandgoing up again, the profit growth rate of enterprises in Jiangsu and Zhejiang may gradually bottom out, indicating that the worst timemay be passing. The manufacturing PMI have recently exceeded market expectations, stayinginthe expansion rangefor three consecutive months.The non-manufacturing PMI continued to surgetoa 10-year high. The current issue of declining corporate profits can be addressed by improvingdomestic demand,takingpractical measures, and avoiding overstating pessimism. Additionally, it should be noted that corporate profits are highly leveraged and prone to booms and busts. The top prioritynowadays is to ensurestable economic growth.
