China’s industrial profits took a sharp nosedive in September, marking the largest monthly decline of the year, according to official data released on Sunday. The profits plummeted by 27.1% compared to the same period last year, following a 17.8% drop in August. In the first nine months of the year, earnings fell by 3.5%, a stark contrast to the 0.5% rise recorded in the January-August period, as reported by the National Bureau of Statistics (NBS).
The slowdown in industrial profits is reflective of the broader economic challenges facing China. The country’s economy experienced its slowest growth since early 2023 in the third quarter, with the troubled property sector showing little signs of recovery. This has prompted policymakers to implement stimulus measures in a bid to rejuvenate economic growth.
Recent data also indicates growing deflationary pressures, weaker export growth, and subdued loan demand, further underscoring the need for fiscal stimulus to stimulate economic recovery. Notably, the auto industry in China has been particularly hard hit, with profits plunging by 21.4% year-on-year to 30.5 billion yuan in August, according to data from the China Passenger Car Association.
In response to the economic challenges, China’s finance minister has pledged to implement additional fiscal stimulus measures to boost the ailing economy. This comes on the heels of the central bank’s announcement of aggressive monetary support measures, the most significant since the onset of the pandemic.
A breakdown of the NBS data reveals that state-owned firms saw a 6.5% decline in profits in the January-September period, while foreign firms experienced a 1.5% increase. On the other hand, profits for private-sector companies decreased by 0.6%.
The industrial profit data covers firms with annual revenues of at least 20 million yuan ($2.8 million) from their primary operations. The economic challenges facing China are significant, and policymakers are under pressure to implement measures that will support growth and stabilize the economy.
($1 = 7.0746 renminbi)