Beijing's Stimulus Measures: A Response to Slowing Industrial Profits in China
Beijing's Response to Slowing Industrial Profits
Industrial profit growth among China's largest enterprises has decelerated significantly, with profits up only 0.5% year-on-year as of August. This sharp decrease from a previous 3.6% growth highlights an urgent need for stimulus measures by Beijing.
Impact of Weak Domestic Demand
In August alone, profits for major industries plummeted by 17.8%, a stark contrast to July's 4.1% gain. Zhang Zhiwei, chief economist at Pinpoint Asset Management, mentions that lower corporate profits threaten tax revenues and could exacerbate challenges in the labor market. The recent unpredictable Politburo meeting has prioritized economic recovery, particularly amid weak domestic demand.
Strategies Introduced by the Government
- Beijing is implementing large-scale equipment upgrades.
- A trade-in programme is being introduced for consumer goods.
- An injection of 300 billion yuan through ultra-long-term special treasury bonds is designed to boost consumption.
China aims to meet its “around 5%” growth target despite the economic hurdles, including property-sector distress and local government financial strains. The call from President Xi Jinping for enhanced support for the private sector reflects a proactive approach to stimulating the economy.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.