In a stark illustration of economic challenges and declining prices, China's industrial profits plummeted by 27.1% year-on-year in September, as stated by the National Bureau of Statistics (NBS) on Sunday. This notable drop in profits marks the most considerable monthly decline in 2024, attributed to weak demand, falling industrial prices, and increasing operational costs, according to an NBS representative. The monthly NBS report, which has recorded a 17.8% decrease in industrial profits year-on-year for August, focuses exclusively on companies earning $2.8 million or more annually. For the initial nine months of the year, industrial profits for these larger enterprises fell by 3.5% compared to the previous year. Data reveals that private-sector manufacturers outperformed state-owned enterprises in terms of profit during this timeframe.
Companies with investments from foreign entities, including those from Hong Kong, Macao, and Taiwan, reported a profit increase of 1.5% year-on-year in the first three quarters, while domestic private firms saw a modest overall profit rise of 0.6%. Conversely, state-controlled enterprises experienced a 6.5% decrease in total profits year-on-year, with joint-stock enterprises—those that may include government stakeholders—reporting a profit drop of 4.9%. Nonetheless, certain sectors within China’s industrial landscape showed promise in the first three quarters, notably within the computer, communications, and electronic equipment manufacturing fields, where profits increased by 7.1% year-on-year, according to NBS figures. Moreover, the non-ferrous metal smelting and rolling processing sector witnessed an impressive profit rise of 52.5% year-on-year, alongside a 13.8% gain in the electric power and heat production and supply industries.
The agricultural and food processing sectors also reported a 6.6% profit increase during the same period. In response to these economic challenges, Beijing has rolled out several stimulus measures aimed at revitalizing the economy, with the People's Bank of China reducing interest rates as part of its strategy. The country's gross domestic product (GDP) grew by 4.5% year-on-year in the third quarter, slightly falling short of the government's annual growth target of 5%. On Sunday, China's finance vice-minister, Liao Min, assured that further fiscal stimulus would be enacted, emphasizing the government’s commitment to achieving its 2025 GDP growth targets. In a prepared statement, Liao asserted, "China will double down on its countercyclical fiscal measures, implement strong initiatives to address local government debt, stabilize the real estate market, raise incomes for key groups, ensure people's livelihoods, and promote equipment upgrades and trade-in programs for consumer goods." Critics highlight the persistent sluggishness within China’s industrial and real estate sectors, urging the need for more proactive measures from Beijing to foster economic growth. The nation's producer price index (PPI) fell by 2.8% year-on-year in September, underscoring weak industrial demand.
Additionally, the S&P Global adjusted manufacturing sector purchasing managers index (PMI) dropped to 49.3 in September, down from 50.4 in August, slipping below the pivotal 50 mark that indicates growth versus contraction..