China's Industrial Profits Decline at Slower Rate Amid Economic Challenges

BEIJING (Reuters) – China’s industrial profits fell at a slower rate in November, as reported by official data on Friday. This slight improvement offers some relief to a struggling sector, even though ongoing weak domestic demand hinders recovery.

The world’s second-largest economy has faced challenges in establishing a robust post-pandemic rebound, with hesitance in both business and household spending and investment. Factors contributing to this include a ongoing housing downturn and uncertainties arising from the incoming U.S. administration under President-elect Donald Trump.

In November, industrial profits decreased by 7.3% compared to the same month last year, following a 10% drop in October, according to data from the National Bureau of Statistics (NBS). The slower rate of decline in November indicates improved profits, suggesting that recent economic stimulus measures are beginning to take effect, according to Zhou Maohua, a macroeconomic researcher at China Everbright Bank.

Additionally, this trend aligns with a reduced decline in factory-gate prices for November, where the producer price index dropped 2.5% year-on-year, compared to a 2.9% decline in October.

On Thursday, the World Bank slightly upgraded China’s 2024 economic growth forecast to 4.9%, up from a previous prediction of 4.8% made in June.

Nevertheless, in the first 11 months of 2024, industrial profits decreased by 4.7%, worsening from a 4.3% decline recorded in January-October, reflecting continued weak private demand within the Chinese economy.

Various economic indicators released this month showcased mixed outcomes. While industrial output saw acceleration in November, new home prices experienced their slowest decline in 17 months.

Zhou commented on the industrial sector's uneven recovery amid weak demand, emphasizing difficulties faced by the real estate sector and other related industries.

In a recent key policy meeting, China’s leadership pledged to raise the deficit, increase debt issuance, and relax monetary policy to sustain stable economic growth. They also promised enhanced direct fiscal support for consumers and strengthened social security measures.

Beijing has agreed to issue a remarkable $411 billion in special treasury bonds for the upcoming year, as reported by Reuters.

The NBS data indicated that state-owned firms faced an 8.4% drop in profits over the first 11 months, while foreign enterprises reported a 0.8% decline, and private-sector businesses experienced a 1% decline. It’s noteworthy that industrial profit metrics pertain to companies with annual revenues of at least 20 million yuan ($2.7 million) from their primary operations.

($1 = 7.2988 Chinese yuan renminbi)