Data from the National Bureau of Statistics (NBS) exhibits a concerning pattern for China’s industrial sector, where profits have experienced a downward spiral for the third consecutive year. In 2024, industrial profits declined by 3.3%, building upon a 4.7% drop from the previous year’s January-November period. This trend is alarming, particularly as it follows a 2.3% decline recorded in 2023. While a small uptick of 11% was noted in December compared to the same month in the previous year, it comes after a disheartening 7.3% drop in November, reflecting an overall fragile state of industrial earnings.
Despite achieving a GDP growth of 5% in 2024, which aligns with government targets, the broader economic landscape remains bleak. The nation grapples with a staggering property market, diminished domestic demand, and wavering business confidence—all factors compounding the struggle for industrial profit recovery. The Chinese government responded with economic stimulus initiatives throughout the year, including measures to enhance consumer spending, such as the expansion of a trade-in scheme for consumer goods. However, these efforts seem insufficient to meaningfully uplift the industrial sector as imbalanced economic growth persists.
Heightened external tensions and trade risks are further complicating the industrial sector’s recovery efforts. With the ascent of the Trump administration in the U.S. and its contemplation of a 10% punitive duty on Chinese imports, factories scrambled to clear inventories by ramping up exports in December. This reaction underscores the broader volatility and insecurity within the industrial landscape. Notably, while exports showed a surge, this performance masked deeper issues, such as increasing unemployment rates and slow retail sales growth.
Disparities among ownership structures reveal startling contrasts within the industrial profit landscape. State-owned enterprises saw a profit decline of 4.6%. In comparison, foreign firms recognized a modest 1.7% loss, while private-sector companies managed a 0.5% uplift in earnings. This suggests that state-owned firms continue to struggle against unfavorable market conditions, while private enterprises, albeit slightly, demonstrate resilience amidst the overarching economic malaise.
As profit margins shrink and economic indicators become increasingly worrisome, Chinese policymakers face a critical juncture. The persistent decline in industrial profits signals a pressing need for more nuanced and effective economic policies that can adapt to both internal and external pressures. With the ongoing tumult in trade relations and market dynamics, it is paramount that strategies prioritize not just stimulus, but also structural reforms that can bolster the resilience of China’s industrial landscape for the future. Without recalibrated efforts, the path ahead appears fraught with challenges.