Employees work on the production line at the Jingjin filter press factory in Dezhou, Shandong province, China, August 25, 2022. Portal/Siyi Liu/File Photo Acquire License Rights
BEIJING, Nov 27 (Portal) – Profits at China’s industrial companies rose for a third month in October, albeit at a slower pace, suggesting more policy support from Beijing is needed to boost growth in the world’s second-largest economy .
The 2.7% year-on-year rise sees profit growth slow to single digits after an 11.9% rise in September and a 17.2% gain in August, putting pressure on authorities to provide further support to manufacturers as global demand remains weak dog politicians heading into 2024.
In the first 10 months of 2023, profits fell 7.8% from a year earlier, down 9% in the first nine months, data from the National Bureau of Statistics (NBS) showed on Monday.
China’s economy has struggled to stage a strong recovery following the COVID-19 crisis, as distress in the real estate market, local government debt risks, slow global growth and geopolitical tensions weighed on momentum.
A flood of policy support measures had only a modest impact, increasing pressure on authorities to take further stimulus measures.
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“Three consecutive months of positive profit growth suggest that the worst times, when profitability was reduced by high input costs, excess capacity and weak demand, are over,” said Xu Tianchen, senior economist at the Economist Intelligence Unit (EIU). .
“However, the volatility in earnings is a sign that companies remain very sensitive to input costs,” he added. “The sharp slowdown in year-on-year earnings growth was partly due to a recovery in energy prices.”
The NBS said authorities should “focus on expanding domestic demand and stimulating businesses,” highlighting factories’ trade challenges.
October data was mixed.
According to the official Purchasing Managers’ Index (PMI), both new export and import orders fell for the eighth consecutive month in October. However, industrial production grew 4.6% in October compared to the same period last year, buoyed by strong automobile and restaurant sales.
Goldman Sachs wrote in a note that “earnings differences between different sectors and companies continued to be significant.”
For example, furniture companies’ profits fell 11.8% year-on-year in the first ten months of 2023, while electronics makers’ profits rose 20.8% over the same period.
“Early signs of a comeback in the global electronics cycle will be positive for Chinese manufacturers,” said EIU’s Xu, who warned of downturns across the industry and overcapacity in electric vehicles, lithium batteries and solar cells in 2024.
LONGi Green Energy Technology Co (601012.SS), a major domestic solar energy maker, suffered a 44.1% drop in net profit to 2.5 billion yuan ($346.7 million) in the third quarter, hit by macroeconomic headwinds and an oversupply of offers was caused.
On Monday, China’s central bank and other authorities called for further measures to strengthen financial support for private companies, including approving increased issuance of loans, bonds and stocks.
The central bank governor said earlier this month: “Reshaping the economic growth mode is more important than pursuing a high growth rate,” suggesting that longer-term structural reforms are urgently needed as investment-led growth loses momentum.
China’s blue-chip CSI300 index fell 1.21% after the data was released, while Hong Kong’s Hang Seng lost 1.07%.
According to a breakdown of NBS data, state-owned companies saw a 9.9% drop in profits in the first 10 months, foreign companies saw a 10.2% drop and private sector companies saw a 1.9% drop in profits.
The industrial profits data includes companies with annual revenue of at least 20 million yuan (US$2.74 million) from their main business.
($1 = 7.2922 Chinese Yuan)
Reporting by Joe Cash, Liz Lee and Qiaoyi Li. Editing by Sam Holmes
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