BEIJING: China’s industrial firms posted their worst slump in profits since late 2011 in the first two months of this year, data showed on Wednesday, as increasing strains on the economy in the face of slowing demand at home and abroad took a toll on businesses.
The sharp decline in profits suggests further trouble for the world’s second largest economy, which expanded at its slowest pace in almost three decades last year. The government has already lowered the economic growth target this year to 6.0-6.5 percent, from the actual rate of 6.6 percent in 2018.
Profits notched up by China’s industrial firms in January-February slumped 14.0 percent year-on-year to 708.01 billion yuan ($105.50 billion), the National Bureau of Statistics (NBS) said on its website on Wednesday. It marked the biggest contraction since Reuters began keeping records in October 2011.
The data combines figures for January and February to smooth out distortions caused by the week-long China’s Lunar New Year.
The drag was mainly due to price contractions in key industrial sectors such as auto, oil processing, steel and chemical industries, Zhu Hong of the statistics bureau said in a statement accompanying the data, adding that production and sales are slowing as well.
Profits in the auto sector were down 37.1 billion yuan from a year earlier, while those in the oil processing industry fell 31.7 billion yuan, according to official data.
Zhu said the timing of Lunar New Year holidays that fell in early February also had a bigger negative impact on business operations this year than in 2018.
The trade war with the United States has put a dent on factory activity, corporate earnings, business sentiment and overall consumption in a blow to the economic outlook.
Growth in China’s manufacturing output slumped to a 17-year low in January-February, while factory-gate inflation remained subdued in the same period in a reflection of the deepening strains across the economy.
“Although it’s possible US and China could come to a trade deal in the near future, it still remains a question that it will help reverse the decline in China’s exports,” said Betty Wang, senior China economist at ANZ, adding that waning global demand remains a concern as well.
Policymakers have acknowledged the country’s economy is facing increasing downward pressure, hurt by multi-year campaigns to curb debt risks and pollution, while the trade war with the United States took a toll on export orders and employment.
Beijing is beefing up measures to support the manufacturing industry by cutting the value-added tax, increasing infrastructure spending and reducing direct government intervention.
The profit margin in the manufacturing sector is less than 5 percent and many companies are suffering losses, Li Dongsheng, CEO of TCL Corp. told a Guangdong delegation meeting on the sidelines of an annual parliament meeting in March.
“I advise the government to further lower value-added tax, and if implemented, it will effectively boost the profit-making ability of the manufacturing industry,” said Li.
Lots of other firms are already facing margin pressure. Jiangsu Shagang, China’s biggest private-owned steel mill, expects its first quarter net profit to decline as much as 68.6 percent year-on-year.
Industry data out on Monday also showed China’s automobile sector in reverse gear, with sales down 13.8 percent in February year-on-year, marking the eighth consecutive month of decline in the world’s largest auto market.
Earlier this month, Beijing announced hundreds of billions of dollars in additional tax cuts, which included a three-percentage point reduction in value-added tax for the manufacturing industry that has been grappling with rising costs and lower profit margins in the face of the economic slowdown.
The country’s customs agency said on Wednesday that the VAT cuts will help reduce the tax burdens of importers by 225 billion yuan.
Yet, the support measures are taking time to kick in. Most analysts believe economic activity may not convincingly stabilize until the middle of the year.
China’s industrial profits shrink most since late 2011 as economy cools
China’s industrial profits shrink most since late 2011 as economy cools
- The sharp decline in profits suggests further trouble for the world’s second largest economy
- Beijing is beefing up measures to support the manufacturing industry
AI will never replace human creativity, says SRMG CEO
- Speaking to Maya Hojeij, senior business anchor at Asharq with Bloomberg, Jomana R. Alrashid expressed pride in SRMG platforms that had absorbed and adopted AI
RIYADH: Jomana R. Alrashid, CEO of Saudi Research and Media Group, highlighted how AI cannot replace human creativity during a session at The Family Office’s “Investing Is a Sea” summit at Shura Island on Friday.
“You can never replace human creativity. Journalism at the end of the day, and content creation, is all about storytelling, and that’s a creative role that AI does not have the power to do just yet,” Alrashid told the investment summit.
“We will never eliminate that human role which comes in to actually tell that story, do the actual investigative reporting around it, make sure to be able to also tell you what’s news or what’s factual from what’s wrong ... what’s a misinformation from bias, and that’s the bigger role that the editorial player does in the newsroom.”
Speaking on the topic of AI, moderated by Maya Hojeij, senior business anchor at Asharq with Bloomberg, the CEO expressed her pride in SRMG platforms that had absorbed and adopted AI in a way that was “transformative.”
“We are now translating all of our content leveraging AI. We are also now being able to create documentaries leveraging AI. We now have AI-facilitated fact-checking, AI facilities clipping, transcribing. This is what we believe is the future.”
Alrashid was asked what the journalist of the future would look like. “He’s a journalist and an engineer. He’s someone who needs to understand data. And I think this is another topic that is extremely important, understanding the data that you’re working with,” she said.
“This is something that AI has facilitated as well. I must say that over the past 20 years in the region, especially when it comes to media companies, we did not understand the importance of data.”
The CEO highlighted that previously, media would rely on polling, surveys or viewership numbers, but now more detailed information about what viewers wanted was available.
During the fireside session, Alrashid was asked how the international community viewed the Middle Eastern media. Alrashid said that over the past decades it had played a critical role in informing wider audiences about issues that were extremely complex — politically, culturally and economically — and continued to play that role.
“Right now it has a bigger role to play, given the role again of social media, citizen journalists, content creators. But I also do believe that it has been facilitated by the power that AI has. Now immediately, you can ensure that that kind of content that is being created by credible, tier-A journalists, world-class journalists, can travel beyond its borders, can travel instantly to target different geographies, different people, different countries, in different languages, in different formats.”
She said that there was a big opportunity for Arab media not to be limited to simply Arab consumption, but to finally transcend borders and be available in different languages and to cater to their audiences.
The CEO expressed optimism about the future, emphasizing the importance of having a clear vision, a strong strategy, and full team alignment.
Traditional advertising models, once centered on television and print, were rapidly changing, with social media platforms now dominating advertising revenue.
“It’s drastically changing. Ultimately in the past, we used to compete with one another over viewership. But now we’re also competing with the likes of social media platforms; 80 percent of the advertising revenue in the Middle East goes to the social media platforms, but that means that there’s 80 percent interest opportunities.”
She said that the challenge was to create the right content on these platforms that engaged the target audiences and enabled commercial partnerships. “I don’t think this is a secret, but brands do not like to advertise with news channels. Ultimately, it’s always related with either conflict or war, which is a deterrent to advertisers.
“And that’s why we’ve entered new verticals such as sports. And that’s why we also double down on our lifestyle vertical. Ultimately, we have the largest market share when it comes to lifestyle ... And we’ve launched new platforms such as Billboard Arabia that gives us an entry into music.”
Alrashid said this was why the group was in a strong position to counter the decline in advertising revenues across different platforms, and by introducing new products.
“Another very important IP that we’ve created is events attached to the brands that have been operating in the region for 30-plus years. Any IP or any title right now that doesn’t have an event attached to it is missing out on a very big commercial opportunity that allows us to sit in a room, exchange ideas, talk to one another, get to know one another behind the screen.”
The CEO said that disruption was now constant and often self-driving, adding that the future of the industry was often in storytelling and the ability to innovate by creating persuasive content that connected directly with the audience.
“But the next disruption is going to continue to come from AI. And how quickly this tool and this very powerful technology evolves. And whether we are in a position to cope with it, adapt to it, and absorb it fully or not.”
