Piles of coal at Rizhao Port, Shandong Province, China on November 2, 2021.
VCG | China Optical Group | Getty Images
China’s industrial profits continued to decline for the fourth straight month, falling 7.3% in November from a year earlier, indicating that Beijing’s stimulus measures have not appreciably halted the decline in corporate profits.
However, the decline in profits was smaller than the declines in previous months. It fell 10% year-on-year in October after a 27.1% decline in September – its biggest decline since March 2020 according to Wind Information.
Suan Teck Kin, head of research at UOB, said there was “no surprise” when it came to the continued decline in profits faced by industrial companies, especially in China’s deflationary environment.
She added that “the worst is over” for the Chinese economy in light of the series of stimulus. “I think it’s just bottomed out, and now it’s on the way up,” he told CNBC’s “Street Signs Asia.”
Industrial profits are a key indicator of the financial well-being of China’s factories, utilities and mines. The earnings show how companies’ balance sheets are stacking up in the wake of Beijing’s steps to stimulate the economy.
Between January and November, China’s industrial profits fell by 4.7% from the same period last year, compared to a 4.3% year-on-year decline in the first 10 months of 2024.
Industrial companies with foreign investments, including those with investments from Hong Kong, Macau and Taiwan, saw their profits fall by 0.8% in the January-November period, compared with last year.
Mining industry profits fell by 13.2% year-on-year in the first 11 months of the year, while manufacturing profits fell by 4.6%. However, the utilities industry – electricity, heat, gas and water supply – saw a 10.9% year-on-year increase in profits between January and November.
“With the effective implementation of existing policies, the accelerated introduction of a package of additional policies, and the continuing impact of the policy mix, industrial production above the set size has grown steadily,” said Yu Wening, a statistician with the National Bureau of Statistics. To Google Translate her comments in Chinese.
Despite a series of stimulus measures introduced since late September, recent economic data from China suggests that the world’s second-largest economy is still struggling with subdued inflation, driven by weak consumer demand and a prolonged contraction in the property market.
China’s consumer inflation rate fell to its lowest level in five months in November, while the country’s export and import data came in below expectations. The latest retail sales data in China was also disappointing, falling short of expectations.
However, some parts of the Chinese economy showed signs of recovery, with manufacturing activity expanding for two months in a row to reach a five-month high in November.
Earlier this month, senior Chinese officials at a key economic agenda-setting meeting committed to strengthening monetary easing efforts, including cutting interest rates, to support the faltering economy.
The World Bank on Thursday raised its forecasts for China’s economic growth in 2024 and 2025, reflecting recent policy adjustments. It now expects China’s GDP to grow by 4.9% in 2024 compared to its previous forecast of 4.8%, while in 2025, China’s GDP is expected to expand by 4.5%, higher than the organization’s previous forecast of 4.1%.
However, the World Bank warned that China’s beleaguered real estate sector, coupled with weak household and business confidence, will remain a headwind to its growth.
