Rising commodity prices are putting pressure on Chinese businesses, even as the country’s broader industrial sector rebounds from the initial effects of the coronavirus pandemic, according to the official data agency.
The National Bureau of Statistics released figures on Thursday showing a 57 percent increase in earnings of major industry companies in April compared to a year earlier, with the sector benefiting by comparison on a small base of 2020 due to pandemic. Revenue rose 92 percent in March.
The data points to an “uneven” improvement in Chinese corporate performance, according to the NBS, even as the economy expands. recovery last year. Higher prices of raw materials have boosted the incomes of miners and other producers but they are also standing up to raise costs for topical items along the supply chain, NBS added.
“Revenues in some consumer products industries have not yet recovered to their pre -epidemic levels,” said Zhu Hong, an NBS official. “Along with the high prices of most commodities, this is increasing production and operational pressures in the middle and subject industries.”
The Chinese government has expressed growing concerns about the commodity price rally driven by the country’s rapid industrial recovery as well as hopes of more rapid global growth this year.
China’s factory prices, driven by commodity prices, leapt to 6.8 percent last month, their fastest pace in three years. But consumer price inflation remained below 1 percent.
A state council meeting chaired by Li Keqiang, China’s premier, last week said steps should be taken to avoid costs that eat up consumer prices.
The country’s economic planning agency issued a warning on Monday about “excessive speculation” and said it would curb hoarding and commodity monopolies, which helped push the price of iron ore is as low as 7 per cent after it hits a high record this month.
NBS data shows us businesses involved in smelting non-ferrous metals rose 484 per cent and mining revenue doubled from January to April, compared to the same period a year earlier.
Consumption lags behind the strength of China’s recovery industry sector, which has seen rising domestic product growth return to pre-pandemic values at the end of last year. This is a challenge for companies facing higher costs and consumer confidence, which is not fully realized.
“The problem for them is that, it’s often very difficult to pass on cost pressure to consumers,” said Larry Hu, China’s chief economist at Macquarie.