A pile of coal in Rizhao Port, Shandong Province, China, November 2, 2021.
VCG | Visual China Group | Getty Images
China’s industrial profits fell for the fourth consecutive month, falling 7.3% in November from a year earlier, showing that the Chinese government’s economic stimulus measures have not yet been able to meaningfully stem the decline in corporate profits.
However, the decline in profits was smaller than the decline in the previous month. Following a 27.1% drop in September, October saw a 10% year-on-year drop, marking the largest drop since March 2020, according to Wind information.
UOB research director Xuan Teck Kin said it was “not surprising” about the continued decline in profits faced by industrial companies, especially in China’s disinflationary environment.
However, he added that “the worst is over” for China’s economy given the push for a series of stimulus measures. “I think we’ve basically just hit the bottom, and now we’re on the way up,” he told CNBC’s “Street Signs Asia.”
Industrial profits are an important indicator of the financial health of China’s factories, utilities, and mines. The results show how companies’ balance sheets are stacking up as a result of the Chinese government’s economic stimulus measures.
From January to November, China’s industrial profits fell 4.7% year-on-year, while in the first 10 months of 2024 they fell 4.3% year-on-year.
Profits of foreign companies, including investments from Hong Kong, Macau and Taiwan, fell 0.8% year-on-year from January to November.
Mining profits for the January-November period of this year fell by 13.2% compared to the same period last year, while manufacturing profits fell by 4.6%. However, utilities, such as the supply of electricity, heat, gas and water, saw profits increase by 10.9% year-on-year from January to November.
Yu Weining, statistician of the National Bureau of Statistics, said, “With the effective implementation of existing policies, the acceleration of the gradual introduction of policy packages, and the continued effectiveness of policy combinations, the mining industry exceeds the specified size. Production has grown steadily.” I tried Google translation of her comment in Chinese.
Despite the introduction of a number of stimulus measures since late September, recent economic data from China shows that the world’s second-largest economy continues to suffer from weak consumer demand and a long-term downturn in the real estate market. This shows that the economy is continuing to fight against disinflation.
China’s consumer inflation rate fell to a five-month low in November, but the country’s import and export statistics were weaker than expected. China’s latest retail sales figures were also disappointing, falling short of expectations.
However, some parts of China’s economy are showing signs of recovery, with manufacturing activity expanding for the second month in a row and hitting a five-month high in November.
Earlier this month, Chinese government officials pledged to step up monetary easing efforts, including lower interest rates, to support the struggling economy at a meeting to set a key economic agenda.
The World Bank on Thursday raised its forecast for China’s economic growth in 2024 and 2025, reflecting recent policy adjustments. Currently, China’s GDP growth rate in 2024 is expected to be 4.9%, compared to the previous forecast of 4.8%, and in 2025, China’s GDP is expected to expand by 4.5%, higher than the agency’s prior forecast of 4.1%.
However, the World Bank warned that woes in China’s real estate sector, along with weak household and business confidence, will continue to be a headwind to growth.
