Employees work on a new energy vehicle assembly line at the factory of Chinese EV start-up Leap Motor in Jinhua, Zhejiang Province, China, April 1, 2024.
Shi Kuanbing | VCG | Visual China Group | Getty Images
China’s industrial profits rose 21.6% year-on-year in September, the National Bureau of Statistics said on Monday, despite persistent trade tensions with the United States, as the Chinese government’s campaign to curb price competition helped ease pressure on manufacturing.
The sharp rise extended a strong recovery that began in August, when industrial profits rose 20.4% year-on-year, marking the biggest increase since November 2023.
Profits at major industrial companies rose 3.2% in the first nine months of this year, accelerating from a 0.9% rise in the first nine months of the year, official data showed.
As producer price deflation enters its third year, the recovery in corporate profitability has been helped primarily by Chinese government policies aimed at curbing intense price competition across industrial sectors.
China’s consumer prices fell more than expected in September, falling 0.3% year-on-year, while the producer price index fell 2.3%.
Manufacturing industry profits rose 9.9% year-on-year in the January-September period, while profits of electricity, heat, fuel and water supply companies rose 10.3%. Meanwhile, profits in the mining sector fell by 29.3%.
NBS chief statistician Yu Weining said high-tech manufacturing drove broad-based profit growth, with sector profits surging 26.8% in September.
Among industrial enterprises, profits of state-owned enterprises decreased by 0.3%, while profits of foreign industrial enterprises, including investments from Hong Kong, Macau and Taiwan, increased by 4.9%, and profits of private enterprises increased by 5.1%.
China’s manufacturing industry has weathered uncertain trade policy with the United States and weak domestic consumer confidence as the world’s second-largest economy faces a prolonged housing recession, weak labor market and growing headwinds to exports.
While the country’s overall exports remain resilient this year, analysts expect trade growth to slow in the final quarter, in part due to last year’s high base.
“Export growth increased from 6.2% year-on-year in the second quarter to 6.6% in the third quarter, but we expect it to slow in the fourth quarter, due to the high base and rising trade barriers globally,” Nomura’s economist team said.
China’s economy expanded by 4.8% in the third quarter, the lowest level in a year. Fixed asset investment unexpectedly fell by 0.5% in the first nine months of this year, the first decline since 2020 during the pandemic, according to Wind Information data dating back to 1992.
Industrial production grew faster than expected in September, rising 6.5% year-on-year, up from 5.2% in the previous month.
Analysts said the strong headline numbers suggested that the Chinese government may not feel as much urgency to roll out further stimulus to meet its growth target of about 5% this year.
Chinese policymakers promised to boost domestic demand at a high-profile economic planning conference earlier this month, while also stressing the need for technological progress and boosting the country’s industrial capacity.
“There are references to ‘increasing domestic demand’ and ‘improving livelihoods’, but they are relatively unnoticeable,” said Louise Lu, head of Asian economics at Oxford Economics.
“These suggest that while policymakers recognize weak household sentiment and a savings glut, they are not anticipating large-scale consumption stimulus over the next five years,” Lu added.
