Chinese Industrial Profit Growth Slows
The overall increase in the profits of just 5.3% in March from the previous decline of 17.2% in the first two months of the year for the earnings growth in China, shows how the second-largest economy could slow down even further. Although there is an overall decline in China, some businesses continue to advance, while overcapacity, reduced government spending, and a difficult environment to operate their businesses in hurt others. Sports retailers show a decline with their massive growth in inventory as their earnings fell 20% from a year earlier. Auto sales have also declined due to a maturing market that is showing a weak recovery. The real-estate sector, instead, is the biggest contributor to the domestic demand, which might bring a decline to the overall economy of China when the government crackdown on bubbly housing prices could possibly slow the development.
The industrial profit can increase as China’s leaders want household consumption to play a larger role in reshaping the economy to encourage growth, but there has been an unpredictable market. I believe that as China’s markets shows a decline in overall growth; it can also affect the growth here in the United States. If companies are doing poorly overseas in China, such as YUM Brands, which is the owner of the KFC restaurant chain, it can affect the overall company and their sales. With a decline in profits for these companies, it may force them to bring changes to how they operate elsewhere and in the United States as well. It is important that the leaders in China, as well as businesses, figure out a way to resolve this issue and increase their growth in industrial profits.
Written by: Samantha Chin
Source: The Wall Street Journal