As stated by Wind Information, that marked the most lasting increase in production costs after September 2008, when the index increased 9.13%.
As stated by a Reuters poll the gains exceeded an 8.5% raise. However, the growth does come off a low base. The index dropped 3.7% in May 2020 during the initial months of the COVID-19 epidemic.
Increasing raw material prices are a particular concern for companies in the building materials business and iron and steel, told Gan Jie, Beijing-based Cheung Kong Graduate School of Business. Gan is a finance and academic director for MBA programs.
These Companies Are More Pessimistic
They see very substantial growth in costs. Moreover, they think it’s continuing to run until the end of the year. So she said Wednesday, noting other businesses’ expected prices would normalize sooner. That’s based on her team’s follow-up in the last week on a survey of more than 2,000 Chinese companies in the industrial sector.
In late March and April, the original poll found that business sentiment remained unchanged in the opening quarter compared with the prior quarter. Nevertheless, the study found that the proportion of companies reporting gross profit margin under 15% has increased to around 70%.
They are certainly being squeezed, Gan said. A few companies even stated they could not accept orders because the more they produce, the more they lose money. As a result, their net profit is in the negative digits.
In the last couple of weeks, the central Chinese government has published additional support for small businesses. It especially affects those influenced by rising raw material prices.
As stated by a CNBC translation, the influence on mid-sized and small businesses is relatively significant, Wang Jiangping, vice-minister of the Ministry of Industry and Information Technology, said reporters last week in Mandarin.
He remarked that their operating profit margin of 6% in the first four months was two percentage points weaker than that of large enterprises — a growing gap.