Workers use a crane to transport steel coils at a plant in Hefei, East China's Anhui Province in April. Photo: VCG

China's industrial profit grew 16.4 percent year-on-year in July to 703.67 billion yuan ($108. 4 billion), continuing the expansion momentum. But the growth rate has slowed for the fifth straight month, underscoring the imbalance and uncertainty in recovery as floods, coronavirus cases resurgence and commodity price hikes that weigh on the economy.  

In the first seven months, industrial enterprises above designated size recorded a combined profit of 4.92 trillion yuan, up 57.3 percent year-on-year, which translated to an average annual growth of 20.2 percent over the recent two years, according to data released by the National Bureau of Statistics (NBS) on Friday.

A total of 25 out of 41 industries reported gains in profit in July, and over 70 percent of industries reported profit levels higher than the pre-COVID-19 period. Mining and raw material manufacturing industries recorded impressive profit expansion, jumping 203 percent and 50.9 percent year-on-year, respectively. Their growth in July has accelerated from that in June.

Oil and gas exploitation, oil processing, coal and the chemical sectors also drove the profit expansion in July, as market demands continue improving and bulk commodity prices surge. The low base effect also contributed to the growth.  

High-tech manufacturing also booked a rapid rise in earnings, with the pharmaceutical industry's overall profit soaring 110 percent as a result of robust demands for coronavirus vaccine and personal protective equipment (PPE).  

Observers said that while the slow-than-expected reading mirrors a Chinese economy that has emerged from the clouds of a prolonged coronavirus epidemic, it also underscores a slew of challenges that could derail a steady rebound in the second half. 

"The industrial profit in June has maintained stable growth streak, but uncertainties still linger on," Zhu Hong, a senior statistician at the NBS, said on Friday. Zhu took note of the sporadic outbreaks of coronavirus and historic levels of flooding, as well as rising bulk commodity prices, which ramp up pressure on the cost and profitability of enterprises, especially downstream small- and micro- firms. 

China's coal price has seen a modest rise in recent days amid an import suspension and national safety checks. 

According to data released by the Ministry of Commerce, the price of coking coal has edged up by 1.9 percent, or 859 yuan per ton, last week. Some enterprises worry the surging coal price, after the stabilizing of steel price, may squeeze out the profits of a variety of downstream industries including infrastructure building, shipping and manufacturing. 

Zhu noted that in the next step, the authorities will further take measures to stabilize bulk price and improve supply chain resilience. 

In June, industrial firms' profits rose 20 percent year-on-year to 791.8 billion yuan, NBS data showed. 

Global Times