Industrial profits in China fell 10% in October compared to a year earlier, marking the third consecutive month of decline, according to data from the National Bureau of Statistics (NBS). Although this figure represents an improvement over the 27.1% drop recorded in September, it shows that Beijing’s stimulus measures have not yet fully reversed the crisis in corporate income.
Economic trends and challenges
In the first ten months of 2024, industrial profits decreased 4.3% year-on-year, accelerating from the 3.5% reported through September. This indicator, key to measuring the financial health of factories, mines and public services, reflects the difficulties facing the world’s second largest economy.
According to NBS statistician Yu Weining, the slight improvement in October is due to the recovery in sectors such as high-tech and equipment, driven by stimulus policies.
However, deflationary pressures persist. The producer price index fell 2.9% year-on-year in October, while the consumer price index rose just 0.3%, marking its weakest growth since June. In addition, industrial production and investment in fixed assets showed slower than expected growth, highlighting a 10.3% drop in the real estate sector.
Sectoral impact and prospects
- State-owned companies: They recorded an 8.2% drop in profits between January and October.
- Private companies: They experienced a more moderate decline of 1.3%.
- Foreign companies: Profits grew marginally by 0.9% in the same period, highlighting the positive impact of anticipated exports due to possible higher tariffs in the United States.
Eugene Hsiao, a strategist at Macquarie Capital, said these figures suggest a gradual stabilization of Chinese economic conditions, albeit from a low base. Additionally, he anticipates that additional fiscal support scheduled for 2025 could have a more significant impact on corporate income.
Positive sides and next steps
It’s not all bad news. Retail sales beat expectations in October with year-over-year growth of 4.8%, while the unemployment rate fell to 5%. These indicators show encouraging signs of recovery in domestic consumption.
On the other hand, the Chinese government has intensified measures to achieve its 5% growth target, including fiscal stimuli and looser monetary policies. In this context, the Purchasing Managers’ Index (PMI) for November, which will be published soon, is expected to show a slight expansion in manufacturing activity, consolidating a firmer base for the end of the year.
Conclusion
The Chinese economy faces significant challenges, but stimulus measures are beginning to cushion the impact on key sectors. As Beijing strengthens its efforts, the outlook for 2025 could be more optimistic, especially if domestic consumption can be stabilized and deflationary pressures overcome.
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