Piles of coal at Rizhao port in China’s Shandong Province on Nov. 2, 2021.
VCG | Visual China Group | Getty Images
China’s industrial profits extended declines to a fourth straight month, dropping 7.3% in November from a year earlier, signaling that Beijing’s stimulus measures have yet to meaningfully stem the slide in corporate earnings.
However, the drop in profits was less than the declines in the previous months. They had slumped 10% year on year in October following a 27.1% plunge in September — their steepest drop since March 2020 according to Wind information.
There is “no surprise” when it comes to the persistently lower profits faced by the industrial companies, especially in China’s disinflationary environment, said Suan Teck Kin, head of research at UOB.
However, “the worst is over” for China’s economy given the slate of stimulus push, she added. “I think it’s basically 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 factories, utilities and mines in China. The earnings show how business balance sheets stack up in the aftermath of Beijing’s steps aimed at stimulating the economy.
Between January and November, China’s industrial profits fell 4.7% from the same period last year, compared to a 4.3% drop year-on-year in the first 10 months of 2024.
Industrial firms with foreign investments, including those with investments from Hong Kong, Macao and Taiwan, saw profits dip by 0.8% from January to November, compared to a year ago.
The mining industry’s profits slumped 13.2% year on year in the first 11 months of the year, while manufacturing profits dropped 4.6%. However, 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 incremental policies, and the continued effect of the policy combination, industrial production above designated size grew steadily,” said Yu Weining, statistician at the National Bureau of Statistics, according to a Google translation of her comments in Chinese.
Despite a slew of stimulus measures introduced since late September, recent economic data from China indicates that the world’s second-largest economy continues to grapple with disinflation, driven by weak consumer demand and a prolonged downturn in the property market.
China’s consumer inflation fell to a five-month low in November, while the country’s exports and import data missed expectations. China’s most recent retail sales data also disappointed, missing forecasts.
However, some parts of China’s economy have shown signs of a recovery, with manufacturing activity expanding for two months in a row and hitting a five-month high in November.
Earlier this month, China’s top officials committed at a key economic agenda-setting meeting to dial up monetary easing efforts, including lowering interest rates to support the ailing economy.
The World Bank on Thursday raised its forecast for China’s economic growth in 2024 and 2025, reflecting the recent policy adjustments. It now expects China’s GDP to grow 4.9% in 2024 compared with its previous projection of 4.8%, while in 2025, China’s GDP is expected to expand by 4.5%, higher than the organization’s prior forecast of 4.1%.
However, the World Bank cautioned that China’s embattled property sector, alongside subdued household and business confidence, will remain headwinds to its growth.
