China's industrial profits plunge 13%, fastest drop in a year
What's the story
China's industrial sector witnessed a major slump in November, with profits plummeting by 13.1% year-on-year (YoY). The fall was sharper than the 5.5% decline recorded in October, according to data released by the National Bureau of Statistics (NBS). The downturn is mainly attributed to weak domestic demand and persistent factory-gate deflation, despite better-than-expected goods exports during the period.
Profit trends
Industrial profits show marginal growth in 11 months
In the first 11 months of this year, industrial profits saw a marginal increase of 0.1% from the previous year. This is a slowdown from the 1.9% growth seen in January-October. The coal mining and washing industry witnessed a massive profit drop of 47.3%, contributing to this overall trend across China's industrial sector, within the broader economy which has an estimated value of $19 trillion.
Economic slowdown
China's economy shows signs of slowing down
China's economy has been slowing down as the year comes to an end. However, officials have not yet introduced new policy measures to support it. Observers believe that Beijing is somewhat reassured by indicators suggesting that the official 2025 growth target of around 5% is still within reach. A US-China trade truce has also helped reduce tensions between the two countries.
Recovery challenges
Industrial profitability recovery needs stronger footing
NBS Chief Statistician Yu Weining said that against a volatile global backdrop and continued structural adjustment as industries transition from old to new growth drivers, the recovery in industrial firms' profitability still needs to be put on a firmer footing. This highlights the challenges facing China's industrial sector amid ongoing global uncertainties and internal economic transitions.
Sector performance
Automotive and high-tech manufacturing sectors show profit growth
Despite the overall decline in industrial profits, some sectors have shown resilience. The automotive industry reported a 7.5% rise in profits, an acceleration from the January-October period. High-tech manufacturing also witnessed a profit increase of 10% YoY, an improvement over the earlier months of this year. These figures indicate that certain sectors are still thriving amid broader economic challenges.
Policy commitment
China pledges to support consumption and investment
At a recent meeting, Chinese policymakers promised to maintain a "proactive" fiscal policy next year to boost consumption and investment. The government has also pledged to improve employment rates, increase household consumption levels, revive prices, and stabilize the property market which has been in a prolonged slump. These commitments are part of China's efforts to navigate its current economic challenges and stimulate growth across various sectors.