China's industrial profits fall for 2 consecutive months: Here's why
What's the story
China's industrial profits have seen a decline for the second consecutive month, with a 4.3% drop in June compared to last year. The National Bureau of Statistics released the data today, following a larger contraction of 9.1% in May. This continuous decline highlights the need for authorities to control cutthroat competition among companies, known as "involution" in China.
Market response
Decline in industrial profits could hurt business confidence
The continued decline in industrial profits could hurt business confidence, leading to reluctance among companies to invest or hire. Exports to the US have also plummeted after Donald Trump's tariffs increased selling costs in the world's largest consumer market. This is likely further squeezing profit margins for Chinese manufacturers.
Policy response
China vows to eliminate outdated industrial capacity
Top economic policymakers in China have vowed to crack down on "disorderly" low-price competition and eliminate outdated industrial capacity. This commitment was made at a key meeting earlier this month. The pledge has already triggered recent rallies in the cost of polysilicon and other commodities, indicating a potential shift toward stabilizing industrial profits amid ongoing economic challenges.