China’s industrial profits continued their downward trend, recording a 7.3% year-on-year decline in November.
This marks the fourth consecutive month of declining profits, highlighting the ongoing challenges facing the country’s industrial sector despite recent efforts by Beijing to stimulate economic growth.
The November drop in profits was slightly less severe than the previous months. In October, industrial profits had fallen by 10%, while September saw a substantial 27.1% plunge—the steepest decline since March 2020. These figures reflect the ongoing struggles of China’s industrial firms, which are facing persistent low demand and a disinflationary environment.
Despite the decline, experts note that the situation may be improving. Suan Teck Kin, head of research at UOB, commented that the worst may be over, suggesting that the economic measures taken by Beijing, including monetary easing, are beginning to show some positive effects.
“I think it’s basically just bottomed out, and now it’s on the way up,” she said in a CNBC interview.
For the year-to-date, industrial profits in China have fallen by 4.7% from the same period in 2023. This is a slight worsening from the 4.3% decline recorded between January and October. The data indicates that despite the government’s stimulus efforts, which include interest rate cuts and liquidity measures to encourage lending, domestic consumption remains weak.
A breakdown of the data reveals that the mining sector has been hit particularly hard, with profits falling 13.2% from January to November. Meanwhile, the manufacturing sector saw a 4.6% drop in profits, though the utilities industry, which includes electricity, gas, and water supply, reported a positive outcome with a 10.9% increase in profits over the same period.
China’s economic difficulties are compounded by broader challenges, including a prolonged downturn in the real estate sector and weak consumer demand. November’s consumer inflation dropped to a five-month low, and both imports and exports failed to meet market expectations. Retail sales data also fell short of projections.
However, some parts of the economy are showing signs of recovery. Manufacturing activity expanded for two consecutive months, reaching a five-month high in November. Additionally, China’s top officials have committed to further easing monetary policy to support the economy, including lowering interest rates and increasing fiscal spending.
While the World Bank has slightly revised its growth forecast for China, now predicting a 4.9% increase in GDP for 2024 (up from 4.8%), the outlook remains cautious. The World Bank has noted that challenges, particularly in the property sector, as well as weak business and consumer confidence, will continue to pose risks to China’s recovery.
