China had been growing at a breakneck pace over the last three decades or so, but now the country is going through an economic downturn as well. The country’s GDP grew at a slower rate for the first time in three decades and that had a major effect on the domestic demand. To make matter worse, Chine then got involved in a bruising trade war with the United States and it has now gone on since the end of 2018. Currently, there is no end in sign despite the trade representatives going through several rounds of talks this year.
Hence, the release of the country’s industrial data for June had been a highly anticipated one for most investors. The results have, however, proven to be disappointing as the profits generated by firms involved in industrial production shrunk by as much as 3.1% year on year. According to data released by the National Bureau of Statistics, the total industrial profits plunged to 601.9 billion yuan, which reflects a decline of 3.1% year on year.
The state of the country’s industrial profits has been in a downward spiral ever since the beginning of the trade war with the United States. In this regard, it needs to be pointed out that due to the mounting tensions of the trade war; investment into the industrial sector has gone down substantially over the past months. In addition to that, projects which had already been flagged by industrial firms also had to be canned or scaled back substantially as the uncertainty around trade continued. It is necessary to keep in mind that uncertainty is something that no business can tolerate for long and the trade war with the United States has currently plunged many firms in China into uncertainty. However, last week, news had emerged that an American delegation could be making its way to China to begin talks about the possibility of a trade deal once again. It is something that is going to be followed closely by industrial firms in China.