00:00Huge profits rumbled off China's assembly lines last month.
00:04Industrial profits jumped by nearly 25% in April compared to a year earlier,
00:09the biggest rise since November 2023.
00:13Computing and electronic equipment makers were among the big winners.
00:17Earnings in that sector more than doubled in the first four months of the year
00:20compared to the same period in 2024.
00:24But it wasn't all good news.
00:25Car makers saw their profits fall nearly 17% in the same four-month period
00:30compared to a year earlier.
00:32Well, Mark Oswald is Chief Economist and Global Strategist at ADM Investor Services International.
00:39Great to see you again, Mark.
00:40So are we seeing a real turnaround in China's industrial economy here
00:45or are higher prices partly flattering the numbers?
00:50I don't think it's necessarily higher prices.
00:53I think perhaps for the mining sector, which saw profits grow 28%,
00:59that would definitely be a contribution.
01:02And when we contrast that with the steel sector, which saw profits grow 51%,
01:09prices would definitely have played a role in that.
01:12But I think it's really more a reflection of the way that the world's going.
01:17And so what we're getting is basically case-shaped economies wherever one looks,
01:23whereby the AI-related demand powers obviously big profits in things like mining and electronics.
01:32But the underlying weakness in consumer demand continues to see profits fall in sectors like textiles.
01:41And indeed, you know, perhaps the agri-food is also price-driven.
01:46But it is really a function of where the global economy is going as much as anything else.
01:53So are you saying that the picture across the wider industrial sector is actually quite uneven,
01:59notwithstanding those gains that seem concentrated in tech and electronics and mining?
02:05Yes, it is. It's very diverse.
02:08I mean, steel and mining, steel and iron, it's not surprising.
02:12There have been curbs on output there, largely because demand is simply not what it used to be,
02:18in no small part because the property sector continues to be something of a millstone
02:25around the Chinese economy's net.
02:27And that, you know, steel is obviously very dependent on construction, whether it's residential or commercial.
02:35So you've mentioned the property sector, they're still a bit of a drag.
02:39So what's driving the upward momentum, though?
02:41Is it stronger demand in the sectors we talked about?
02:45Is it the policy support or the shift to higher-end manufacturing?
02:52It's definitely, the shift to higher-end manufacturing is definitely playing a role.
02:56One would have to add that in the case of semiconductors within that electronic sector,
03:03you know, basically high 512-gigabyte memory chips basically gone from ranging in a price of $2 to $4
03:12to now establishing a range in the sort of $18 to $21 area.
03:17So that contributes obviously a lot to profit margins.
03:21So it is demand which is driving those prices up and in turn also helping to improve profits.
03:30Mark Otsvold at ADM Investor Services International.
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