China’s Industrial Profits Plunge in September

By Qiaoyi Li and Kevin Yao

BEIJING (Reuters) – China's industrial profits fell dramatically in September, marking the sharpest decline this year as the government amplifies stimulus efforts to boost economic growth.

Profits dropped by 27.1% compared to the previous year, following a 17.8% decrease in August. The first nine months of 2023 saw earnings decline by 3.5%, contrasting with a 0.5% rise observed in the January-August period, according to data from the National Bureau of Statistics (NBS).

The downturn in industrial profits was attributed to low demand, a significant drop in producer prices, and a higher comparison base since August, explained NBS statistician Wei Ning.

However, recently announced policy measures aim to create a supportive environment for industrial businesses, enhancing their recovery and profitability, Wei stated.

China experienced its slowest economic growth since early 2023 in the third quarter, with the struggling property sector showing little signs of recovery, prompting Beijing to take urgent steps to boost growth.

Additional data indicated rising deflationary pressures, reduced export growth, and weak loan demand, intensifying concerns about the economic recovery and reinforcing the need for fiscal stimulus to stimulate growth.

Profit in China's auto industry fell 21.4% year-on-year to 30.5 billion yuan in August, according to data from the China Passenger Car Association.

In response, authorities have significantly increased policy stimulus, including interest rate cuts, since late September in efforts to meet Beijing's target of approximately 5% growth for this year.

China's finance minister has committed to more fiscal stimulus to rejuvenate the ailing economy, though specifics of the funding remain unclear. Following the central bank's announcement of substantial monetary support measures since the pandemic, speculation regarding the fiscal package has heightened in financial markets.

Reports from local media suggest that China could raise 6 trillion yuan ($842.7 billion) through special treasury bonds over three years to stimulate the weakening economy.

The top legislative body in China is set to convene from November 4-8, as reported by state news agency Xinhua, although details regarding the agenda on highly anticipated debt and fiscal measures are yet to be revealed.

State-owned firms experienced a 6.5% drop in profits during January-September, while foreign firms saw a 1.5% increase, and private-sector profits declined by 0.6%, based on NBS data.

Industrial profit data covers businesses with annual revenues of at least 20 million yuan ($2.8 million) from their primary operations.

> ($1 = 7.1199 Chinese yuan)