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China's industrial profits grow due to increased foreign demand

China's industrial profits grow due to increased foreign demand Illustrative photo (photo: Getty Images)

Industrial companies' profits in China rose in April as exports returned to growth in the same month, giving a boost to the economy, according to Bloomberg.

According to data published by China's National Bureau of Statistics, profits of major Chinese industrial companies in April increased by 4% compared to the previous year. The April rebound reversed the decline in March, which ended seven consecutive months of growth.

Chinese policymakers rely on the country's industrial producers to offset weak domestic demand and help the economy achieve this year's growth target of around 5%. However, weaknesses in the world's second-largest economy are hampering activity.

In April, consumer spending growth unexpectedly slowed to the lowest pace since 2022, while key indicators for the real estate sector deteriorated across the board. Factory prices remained in deflation, as they have been since late 2022, and the producer price index in April decreased by 2.5% compared to the previous year.

All this has forced the government to support the domestic market through greater fiscal and monetary stimulus.

Economists expect the central bank to lower interest rates this year, and the Chinese government has announced a program to increase consumer spending on cars and household appliances by offering subsidies to replace old models. Earlier this month, the government also announced a wide-ranging rescue package for the real estate sector, although analysts doubt whether these measures will be sufficient to end the years-long real estate downturn.

Disputes arise for China over industrial production with the US and the EU

China's large industrial production has become a source of tension with the US and Europe, which have criticized Beijing for flooding the world market with cheap goods, especially in new energy sectors.

Trade disputes seem likely to intensify as China has promised to take decisive action against new tariffs imposed by the administration of US President Joe Biden and hinted at 25% tariffs on automobiles that will affect European and American automakers.

China recently imposed sanctions on three US defense companies for selling arms to Taiwan.

At the same time, US and British intelligence have evidence that China is preparing to provide Russia with lethal aid for use in the war against Ukraine.