(Bloomberg) — Profits at Chinese industrial companies fell faster in September than the previous month, as deflationary pressures sapped the strength of companies’ finances.
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Industrial profits last month at major Chinese companies fell 27.1% from a year earlier, after a 17.8% decline in August, the National Bureau of Statistics said in a statement on Sunday. Profits fell 3.5% in the first nine months compared to the same period in 2023.
The office said in a statement that the data was “affected by factors such as the high base in the same period last year.”
Industrial profits provide a key measure of the financial health of factories, mines and utilities, which could influence their investment decisions in the coming months. Weak earnings have become a symbol of the challenges facing China’s $18 trillion economy, prompting measures such as lowering interest rates since late September.
The country’s top legislature is scheduled to hold a highly anticipated session in Beijing from November 4-8, as investors watch for any approval of further fiscal stimulus to revive growth.
Economists expect the meeting to confirm a plan to refinance local government debt and issue sovereign bonds to pump capital into banks. Investors have been looking for new stimulus in the form of increased borrowing and public spending, but opinions differ on whether they will materialize this year.
Bloomberg Economics said ahead of the release that a deepening deflation in producer prices is likely to have a negative impact on corporate profits despite faster growth in industrial production. Factory gate prices continued their declines for the 24th consecutive month in September, with the recent decline accelerating, reflecting weak domestic demand.
China’s economic expansion slowed in the third quarter despite initial signs of improvement in September, including better industrial performance and increased consumption. The economy grew by 4.6% in the July-September period compared to the previous year, the slowest pace since March 2023.
The growth of the high-tech sector showed signs of hope for the economy, with profits for manufacturers of the industry rising by 6.3% in the first nine months, according to the statistics office.
–With the help of Tian Ying.
(Adds chart and details of high-tech sector performance in last paragraph.)
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