China’s industrial enterprises saw a significant decline in profitability from January to November, marking the largest drop in over a year, once again indicating the faltering steps of China’s economic recovery.
According to the Chinese National Bureau of Statistics, data released on Saturday, December 27th, showed a 13.1% year-on-year decrease in profits for industrial enterprises from January to November, further widening the decline compared to the 5.5% drop recorded from January to October.
The backdrop of this decline in industrial profits lies in the continued deflation of factory prices despite better-than-expected export of goods. This situation is believed to put greater pressure on the Chinese policymakers, demanding them to take more measures to address the long-term weakness in household consumption.
According to a report by Reuters, Xu Tianchen, a senior economist at The Economist Intelligence Unit, stated that the profit data aligns with the overall cooling trend in economic activities in the fourth quarter, mainly attributed to the soft domestic demand dragging down the Chinese economy.
From January to November this year, profits of industrial enterprises above a certain scale increased by only 0.1% year-on-year, lower than the 1.9% growth rate from January to October. One of the contributing factors was the drastic 47.3% plunge in profits of coal mining and washing industry.
The industrial profit data covers enterprises with annual revenue of at least 20 million Chinese yuan.
Yù Wèiníng, Chief Statistician of the Chinese National Bureau of Statistics, mentioned in the accompanying interpretation that the unstable and uncertain international environment, along with the pressure from structural adjustments in the transformation of industrial new and old momentum, requires continuous consolidation for the recovery foundation of industrial enterprise efficiency.
Even the well-known for falsifying figures, official Chinese data shows a significant slowdown in the momentum of China’s economic growth towards the end of the year. According to data released by the Chinese National Bureau of Statistics in mid-December, the growth rate of China’s total retail sales of consumer goods dropped to its slowest since 2022, while investment and the real estate market conditions continue to deteriorate.
The Bank for International Settlements reported that since the COVID epidemic, housing prices in China have fallen by 17%, and the uncertainties in economic prospects have led many ordinary families to start tightening their belts.
Consequently, companies are forced to cut back on hiring, leading to wage suppression. Average disposable income per capita in cities is less than $700 per month, while in rural areas, hundreds of millions of people barely make ends meet with just a few dollars a day.
The Rhodium Group, a U.S. think tank, forecasts that due to a significant decline in fixed asset investment in the second half of the year, China’s economic growth rate for 2025 is estimated to be between 2.5% to 3%, roughly half of what official data implies.