China’s industrial profits suffer biggest slump in 2024 as its economic woes grow

BEIJING – China’s industrial profits swung back to a sharp contraction in August for their biggest decline in 2024, official data showed on Sept 27, adding to a recent spate of bleak business readings that point to mounting pressure on the economy.

Profits plunged 17.8 per cent in August from a year earlier following a 4.1 per cent increase in July, while earnings rose at a slower 0.5 per cent pace in the first eight months compared with 3.6 per cent growth in the January to July period, according to the National Bureau of Statistics (NBS).

The slump in August was due to factors such as “the lack of effective market demand, the greater impact of natural disasters such as high temperatures, heavy rains, and floods in some areas”, said NBS statistician Wei Ning.

A high statistical base in 2023 also magnified the reversal, with falling profits in the automobile and equipment manufacturing industries weighing on the outcome, said China Everbright Bank macroeconomic researcher Zhou Maohua.

A sluggish run of data earlier in September has exacerbated worries about an anaemic recovery, prompting global brokerages to revise down their 2024 China growth forecasts to below the official target of around 5 per cent.

Highlighting weak domestic demand, a key bottleneck for the economy

amid job security anxiety

and worsening slumps in property sales and investment, domestic dairy giant Inner Mongolia Yili Industrial Group posted a 40 per cent fall in second-quarter net profit.

“Domestic consumer demand remains weak while the external environment is complex and changeable,” said NBS’ Wei Ning.

To pump some much-needed optimism into the economy, China’s central bank announced on Sept 24

the most aggressive stimulus

since the pandemic, including a 50 basis point cut on banks’ reserve requirements. But analysts warned more demand-side easing, especially fiscal help, would be vital to restore confidence.

Chinese leaders on Sept 26 vowed “necessary fiscal spending” to hit 2024’s economic growth target.

China plans to issue US$284 billion (S$365 billion) of sovereign debt in 2024 as part of a fresh fiscal stimulus, with part of the proceeds raised via special bonds used to provide a monthly allowance of US$114 per child to all households with two or more children, excluding the first child, Reuters reported.

State-owned firms saw profits down 1.3 per cent in January to August, foreign firms recorded a 6.9 per cent rise, while private-sector companies posted a 2.6 per cent increase, a breakdown of NBS data showed. Industrial profit numbers cover firms with annual revenues of at least 20 million yuan (S$3.66 million) from their main operations. REUTERS