The downturn in the Chinese economy and the shrinking of domestic demand has been one of the biggest stories in international economics for the better part of a year. In addition to that, the turmoil brought upon by the damaging trade war with the United States has had its own effect on the economy, and it remains to be seen if it can recover quickly enough. However, in an alarming development, it has emerged that the profits of Chinese firms actually shrunk in the month of April and that is something that would further stoke fears of a further slowdown in economic growth shortly.
It is important to note that corporate profits had recovered for Marsh, but the latest numbers from the month of April shows that there is a long way to go before it all stabilizes. In recent months, the Chinese government has introduced a range of measures that are supposed to turbocharge the slowing economy, and the pressure is now rising on the state as more intervention is being demanded.
According to the data published by the National Bureau of Statistics, it has emerged that the level of corporate profits for the month declined by as much as 3.7% from the levels in the same month back in 2018 and total profits stood at 515.40 billion Yuan. Back in March, the year on year profits for Chinese company had risen by a handsome 13.9%, and there was widespread hope that the economy was going to be on the recovery trail. However, the reasons behind the drop in profits are manifold. The cut in value added tax that had been imposed at the start of April is perhaps the biggest reasons behind the stark disparity in profit growth in March and April. The cut had instigated a higher volume of purchase in March, and that allowed the profit growth in the month to be higher than expected. However, it affected the growth in April much more adversely. In addition to that, the sharp fall in exports to the United States, one of the biggest markets for Chinese companies, has also affected margins significantly.