Findlay Nicolson - China Industrial Profits Set to Decline

Findlay Nicolson analysts say technology and manufacturing sectors will be more vulnerable to increased tariffs as trade war continues.

Taipei, Taiwan, May 31, 2019 --( In March this year, China’s manufacturing sector earnings broke a four-month long streak of decline and many hoped this indicated that China’s economy would recover this year even in the face of unresolved trade tensions with the United States. But in April, earnings in the manufacturing sector shrank again, increasing pressure on Chinese policymakers to introduce more stimulus measures to support the world’s second largest economy.

Although industrial profits increased by 13.9 percent in March this year, analysts at Findlay Nicolson say this was likely due to increased purchases by businesses ahead of a planned VAT reduction. When companies cut back on purchases in April, the result was a dip in industrial profits of 3.7 percent.

The US China trade war and tariffs imposed by the US have had a significant impact on telecom and electronic manufacturing. Findlay Nicolson analysts say that industrial profits will likely continue to deteriorate at a more rapid pace from this month as the trade war continues.

Although China has already increased support for manufacturing companies short of funds by implementing sizeable tax cuts and increasing infrastructure spending, Findlay Nicolson analysts say the trade war and its implications are starting to affect China’s middle class.

Chinese consumers are growing increasingly concerned about the fate of the economy. Many consumers are reluctant to spend and are looking for ways to safeguard their wealth in gold and foreign currencies. Higher food prices and increased levels of unemployment are adding to fears about the economy and government reassurances are doing little to assuage concerns.
Value Vine
Lincoln Wu