Daily Management Review

China's Industrial Earnings Rise By Double Digits, But The Rebound Is Not Uniform


China's Industrial Earnings Rise By Double Digits, But The Rebound Is Not Uniform
While overall manufacturing improved, China's industrial profits in November showed double-digit rises. However, lacklustre demand continued to restrain expectations for business expansion, strengthening the case for additional macro policy support.
The increase in profits of 29.5% followed increases in October of 2.7% and in November of industrial output, albeit other areas of the second-largest economy in the world fell short of expectations.
National Bureau of Statistics (NBS) data released on Wednesday indicated that industrial earnings fell 4.4% in the first 11 months of 2023 compared to the same period last year, a further narrowing of the 7.8% decrease in earnings from January to October.
In a statement released with the results, NBS statistician Yu Weining stated that the acceleration of industrial profits and returns on investments during the month was the cause of the November profit increase.
Asia's largest economy is predicted to increase by about 5% this year, meeting the government's growth objective despite a patchy recovery from the COVID-19 pandemic thanks to a plethora of pro-growth policies. Gains were prolonged for a fourth month by industrial profits.
According to Zhou Maohua, an analyst at China Everbright Bank, the increase in industrial output and profitability for November demonstrated the manufacturing sector's ongoing growth.
He attributed the upswing to seasonality, poor statistical base from the previous year, and macro initiatives to support industrial firms.
Officials are optimistic that 2024 will bring more advantageous economic circumstances. However, the ongoing weakness of the property sector, growing deflationary pressures, and sluggish global demand continue to undermine the economic recovery and prompt new requests for intervention.
Even while the manufacturing industry as a whole has improved, not all industries have recovered yet.
The disparity in earnings between industrial sectors is still visible, as high-tech and equipment manufacturers witness explosive rise in profits while real estate-related businesses continue to face pressure from declining profitability, according to Zhou.
In order to support growth, the analyst expressed his expectation for a "optimised" combination of macropolicies.
Chinese chemical manufacturer Do-Fluoride New Materials Co. predicted a decline in net profit of 68.17% to 71.25% in 2023, citing heightened competition and lower-than-anticipated downstream demand.
As China's producer prices are projected to stay under pressure for the foreseeable future, there is currently little likelihood that industrial profits would expand during the entirety of 2023, according to Zheng Houcheng, chief macroeconomist at Yingda Securities.
A breakdown of the data showed that, in the first 11 months, state-owned enterprises reported lower earnings by 6.2%, foreign companies reported lower earnings by 8.7%, and private-sector companies recorded higher earnings by 1.6%.
Businesses with yearly revenues from their primary operations of at least 20 million yuan ($2.80 million) are included in the industrial profit figures.