BEIJING: China’s industrial profits were worse off in November than in October but much less so than analysts had expected. According to the government on Friday, when reports emerged that the nation’s weak domestic demand is hindering the onset of an industrial revival.
Despite exceeding economic expectations in the third quarter, the world’s second-largest economy is failing to gain much momentum beyond the pandemic as business and household demand and investment remain sluggish due to a prolonged housing slump and new threats from the incoming Trump administration of the United States.
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Gross industrial profits declined 7.3 percent in November from a year earlier, after a 10 percent drop in October as per the NBS.
The nonfinal fell a smaller 0.075 percent in November compared to a previous 0.15 percent, indicating better profits as recent economic stimulus measures come into effect, said Zhou Maohua, a macroeconomic researcher with China Everbright Bank.
The numbers of profits were also consistent with a smaller decrease in factory gate prices in November.
China’s November industrial output rises 5.4%, above expectations
The producer price index declined to 2.5% year on year basis compared to 2.9% in October.
The World Bank on Thursday also raised slightly its projection of economic growth in China for 2024 to 4.9%, from 4.8% in June.
However, more severally, in the first 11 months of 2024, the industrial profits reduced to reach 4.7%, which was even lower than the 4.3% decline in the January-October period as a result of still tepid private demand in the Chinese economy.
This month alone saw a slew of economic releases which suggested increased industrial output in November up, but new home prices that declined slower than forecasted for the first time in 17 months.
The industrial sector is bearish with an unequal recovery The demand remains insufficient, Zhou Rong noted this evidenced by the challenges experienced in the real estate industry and some related industrial sectors.
The Chinese authorities promised at the latest Politburo session this month to maintain the higher deficit, more bond supplies, and the proper normal monetary policy for a steady and reasonable speed of economic growth. The government has also recently pledged to raise direct fiscals to the consumer besides boosting social security programs.
As the bond next year Beijing has committed to issue the particular special treasury bonds at a record high of 2.56 trillion yuan or $411 billion, according to Reuters news agency.
In the first 11 months, SOEs’ profits dropped 8.4%, foreign firms sank 0.8% and private-sector firms tumbled 1%, data from the NBS showed.
Industrial profit data refer to industrial enterprises with annual sales revenue of not less than 20 million yuan ($2.7 million) from their principal business.
FAQs
Why did China’s industrial profits improve?
Improved cost efficiencies, targeted policy support, and recovery in select sectors contributed to better profit margins.
Which industries saw the most improvement?
High-tech manufacturing, renewable energy, and pharmaceuticals performed better compared to other sectors.
What factors are causing weak demand?
Sluggish domestic consumption, global economic uncertainties, and weakened export demand are key contributors.
How is the government addressing weak demand?
Through fiscal stimulus, monetary easing, and measures to boost consumer spending and investment.
What does this mean for the global economy?
While improved profits indicate some recovery, weak demand in China could affect global supply chains and export markets.
Are there signs of demand recovery?
Recovery is slow, but initiatives like boosting infrastructure spending and consumer incentives might gradually help.
What’s the outlook for the coming months?
Moderate improvement is expected, but external challenges like geopolitical tensions and weak global trade could persist.