China's Growing Industrial Profits

China's Growing Industrial Profits

over 3 years ago2 mins

Data out on Sunday showed the China industrial sector’s still on the up and up, which might’ve been music to global investors’ ears 🎧

What does this mean?

The monthly profit earned by Chinese industrial companies was 19% higher in August than the same time last year. That brings 2020’s total profit decline to 4%, up from 8% in July. And with China’s economy – which remains the only major one expected to grow this year – still expanding, there’s not much reason to think that momentum won’t show in September’s data too.

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That’s probably helped relax European investors, who were fretting only last week that rising coronavirus cases and new lockdowns would damage company earnings all over again 🦠 Seeing as around 35% of the eurozone economy depends on China, its resurgence bodes well for the 19-country bloc

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Why should I care?

Of course, China’s economic relationship with the US is still fraught with controversy. That much is clear from America’s planned ban of social media app TikTok – which was overturned at the eleventh hour on Sunday – and its confirmed ban of telecoms giant Huawei 🚫 The latter in particular has rippled throughout Asia: Kioxia Holdings – the $16 billion Japanese microchip maker part-owned by Toshiba – just shelved its initial public offering plans, worried that weak demand from major customer Huawei will dent its earnings. That pushed Toshiba’s once-hopeful investors to sell the stock, which fell on Monday.

Shares of China’s biggest microchip maker, SMIC, fell 7% on Monday after it was drawn into trade tussles late last week 👊 The US – yep, you guessed it – banned American companies from selling to SMIC without a license because it’s worried the firm’s products will be used for things they shouldn’t. And seeing as those companies are SMIC’s biggest suppliers, the move risks leaving the firm unable to make its products and, more importantly, sell them.

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