Profits at major Chinese automakers fell last month, but automakers posted a significant gain in the first quarter – one of the sectors that worries U.S. officials.
The National Bureau of Statistics reported on Saturday that profits of large manufacturers fell 3.5% in March from a year earlier. For the first three months of the year, profits rose 4.3 percent to 1.51 trillion yuan, or $208 billion.
The new data highlights how weak domestic demand is eating into the profits of Chinese manufacturers, pushing them to sell their products en masse abroad. U.S. Treasury Secretary Janet Yellen and Secretary of State Antony Blinken visited China last month, where they warned about Chinese companies selling their products at lower prices than other manufacturers.
Blinken said at a news conference Friday that he had spoken with Chinese officials about overcapacity in key sectors, including solar panels, electric vehicles and batteries.
“China alone produces more than 100% of the world’s demand for these products, flooding markets, undermining competition and endangering livelihoods and businesses around the world,” Blinken said.
“A real train wreck waiting to happen”
One of the main concerns of the United States is the protection of domestic automobile production. Even though Chinese automakers don’t sell cars in many major markets, such as the United States, overall profits of Chinese automakers jumped 32% in the first quarter, year-on-year, according to the NBS.
China needs to expand into new markets for many products because domestic appetite has grown much more slowly than manufacturing output. Last year, China and Japan were neck and neck for the title of the world’s top auto exporter, and Chinese electric vehicle maker BYD surpassed Tesla.
So far, increased production of electric vehicles has not led to a big increase in inventories — the kind of overproduction that hurts other sectors, according to a Bloomberg analysis earlier this month.
And the automobile industry was not the only positive point in the first quarter: profits in the electronics industry increased by 82.5% year-on-year, according to BES data.
Michael Froman, the U.S. trade representative under the Obama administration, told CNBC on Thursday that China’s export-led growth comes just as international markets are closing to the country. China has publicly viewed U.S. warnings about overproduction as posturing ahead of the presidential election.
“There’s a real railroad disaster looming, and it’s the next generation of trade conflicts,” said Froman, who is now president of the Council on Foreign Relations. “This goes beyond election year activities.”
China is focused on boosting domestic demand and improving business confidence, NBS analyst Yu Weining wrote in a statement accompanying Saturday’s data release. Overall domestic demand is depressed as the country faces falling GDP and a booming real estate market.
businessinsider
