After showing strong growth in the 20% range over the past two months, profits of China's industrial corporations (hereinafter industrial profits) turned downward again in Oct. Foreign media analyzed that this is because domestic consumption has not revived despite an easing of U.S.-China tensions. However, since the Chinese government believes it is possible to achieve the target of "5% annual growth" even amid an economic downturn, additional stimulus measures are expected to be unlikely.
On the 27th, China's National Bureau of Statistics announced that industrial profits in Oct. fell 5.5% from a year earlier. After recording the largest increase (21.6%) in about two years since Nov. 2023 last month, they turned downward again. It also fell well short of Bloomberg's estimate (up 2.8%).
Bloomberg News said, "This is concerning because it risks putting downward pressure on investment and employment," and added, "This slump is particularly troubling given that factory-gate deflation has eased for three consecutive months amid government measures to curb excess production and overcompetition."
China's industrial profits fell year over year for three straight months from May to Jul., then rose 20.4% in Aug., with the increase widening in Sep. As a result, cumulative industrial profits turned from -1.7% in Jan.–Jul. to growth (0.9%) in Jan.–Aug., and recorded 3.2% growth through last month. Afterward, due to the Oct. decline, the cumulative growth rate for Jan.–Oct. shrank to 1.9%.
By corporation type, industrial profits at state-owned corporations remained at the same level as a year earlier, while private corporations rose 1.9%. By industry, sectors including nonferrous metal smelting and rolling (14%), electricity and heat production and supply (13.1%), agricultural and food processing (8.5%), and computer, communications, and other electronic equipment manufacturing (7%) increased year over year. Industrial profits in ferrous metal smelting and rolling turned to a surplus from a year earlier. In contrast, the declines were large in coal mining and washing (-49.2%) and oil and natural gas extraction (-12.5%).
NBS statistician Yu Weining said, "Domestic demand needs to be expanded further," adding, "We must optimize the (industrial) structure, foster new growth drivers, and promote quantitative and qualitative improvements in the industrial economy to continuously strengthen the foundation of the real economy."
Reuters analyzed that the failure to sustain the rise in industrial profits stemmed from weakening growth drivers and sluggish domestic demand. Reuters said, "The decline in industrial profits clearly shows that China, the world's second-largest economy, faces persistent domestic challenges despite signs of easing tensions between the U.S. and China," adding, "Growth momentum has weakened sharply, and economic growth in the third quarter slowed to the weakest level in a year."
It added, "Despite the eight-day National Day holiday in Oct. and a monthlong shopping festival, Oct. retail sales growth proved to be tepid," and said, "Although producer price declines in Oct. eased, prices were still depressed compared with the same period last year, and factory output posted the weakest annual growth rate since Aug. 2024."
However, the Chinese government is not expected to be likely to consider additional stimulus measures. Bloomberg said, "Policymakers in China see little need to rush to act, as the annual growth rate target of around 5% for this year appears achievable."