China’s Industrial Sector Profits Mirror Nationwide Economic Slump

Jennifer George
Jennifer George

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Image Credits: VCG

Data from the National Bureau of Statistics outlined the worrying decline in China’s industrial profits in September. The findings highlighted the crippling ripple effects of China’s sluggish economic growth on its robust industrial sector, which accounts for nearly 40% of the nation’s GDP.

Following a 17.8% drop in August, industrial profits fell by 27.1% in September compared to 2023, marking the sharpest decline since March 2020, when they dropped by 34.9%, according to data from Wind Information. This database did not include figures from most of 2022 when Shanghai and other regions in China faced strict COVID-19 measures that restricted business operations.

Hui Shan, a chief China economist at Goldman Sachs, specified in a note to CNBC on Sunday that the recent data “underscores the need for more forceful policy responses amid weak domestic demand and deflationary pressures.” This worrying trend was supplemented by China’s producer price index, which fell by 2.8% year-on-year in September 2024, steeper than a 1.8% decline in August 2024. “The weakness of industrial profits indicates China’s greater need for demand-side policies,” said Gary Ng, senior economist at Natixis, in an email to CNBC. He added, “While there is divergence across sectors, the stress is particularly high in upstream materials and automobiles.”

China’s slow economic growth has emerged as a central cause for concern, demonstrated by 4.8% growth in the first three quarters of 2024, slightly slower than the 5% pace seen in the first half of the year.