In September, industrial profits in China rose by 21.6% compared to the same month last year, as reported by the National Bureau of Statistics on Monday, indicating that Beijing’s initiative to tackle price wars alleviated pressure on manufacturers despite ongoing trade tensions with the U.S.
This significant increase, following a robust recovery that commenced in August when industrial profits surged 20.4% year-on-year, represented the largest advancement since November 2023.
During the first three quarters of the year, significant industrial firms saw a profit increase of 3.2%, according to official figures, which is an acceleration from a 0.9% gain in the period from January to August.
The recovery in corporate profits was primarily supported by Beijing’s measures aimed at reducing intense price competition across industrial areas, as deflation in producer prices entered its third year.
In September, China’s consumer prices decreased more than anticipated, dropping 0.3% compared to the previous year, while the producer price index fell by 2.3%.
In the January to September timeframe, profits within the manufacturing sector rose 9.9% from a year prior, and revenues from electricity, heating, fuel, and water supply firms increased by 10.3%. Conversely, the mining industry experienced a profit decline of 29.3%.
Yu Weining, NBS’s chief statistician, indicated that high-tech manufacturing significantly contributed to broader profit growth, with earnings in this sector soaring by 26.8% in September.
Among industrial companies, state-owned enterprises saw a profit decrease of 0.3%, whereas foreign industrial firms—including those with investment from Hong Kong, Macau, and Taiwan—enjoyed a 4.9% profit increase, and private firms experienced a 5.1% increase.
Chinese manufacturers have managed to navigate unpredictable trade policies with the U.S. and lukewarm consumer confidence domestically as the world’s second-largest economy faced a prolonged downturn in housing, a weak labor market, and mounting challenges regarding exports.
Despite the resilience in the country’s overall exports this year, analysts predict that trade growth will decelerate in the last quarter, partly due to last year’s elevated base.
“We forecast a slowdown in export growth in Q4, following a rise to 6.6% year-on-year in Q3 from 6.2% in Q2, attributed to a high base and increasing global trade barriers,” commented a team of economists from Nomura.
China’s economy grew by 4.8% in the third quarter, marking the slowest rate in a year. Fixed-asset investment unexpectedly fell by 0.5% in the first nine months of the year—marking the first such drop since the pandemic in 2020—based on data dating back to 1992 from Wind Information.
Industrial output exceeded expectations in September, increasing by 6.5% compared to the previous year, up from a 5.2% growth in the preceding month.
The robust headline figures imply that Beijing might not feel an immediate need to implement additional stimulus measures to meet its growth target of approximately 5% for this year, according to analysts.
While Chinese policymakers vowed to enhance domestic demand at a prominent economic planning gathering earlier this month, they also emphasized the necessity for technological advancements and the upgrading of the country’s industrial strengths.
“Although ‘expanding domestic demand’ and ‘improving livelihoods’ are mentioned, they are relatively less emphasized,” stated Louise Loo, head of Asia Economics at Oxford Economics.
“This indicates that while policymakers acknowledge the weak household sentiment and an excess of savings, they do not foresee large-scale consumption stimulus within the next five years,” Loo further noted.
