China’s Industrial Profit rise 2.7% YoY in October, Slower than September’s gain

China’s industrial profits has continued to rise for the third consecutive month in October. Though at a slower pace it is  indicating a potential need for an additional policy support from Beijing to bolster the country’s economic growth. The year on year (YOY) profit growth of 2.7% marked a narrowing from September’s 11.9% increase and August’s 17.2% gain. Concerns about soft global demand persist and is urging the authorities to consider further assistance to manufacturers heading into 2024.

For the first 10 months of 2023 profits uas showed improvement with a 7.8% decline compared to a 9% drop in the initial 9 months. Challenges faced by China’s economy include housing market distress, local government debt risks, slow global growth and the geopolitical tensions which is hindering a robust post-COVID recovery.

Despite modest effects from policy support measures there is a growing pressure on authorities to implement additional stimulus. The National Bureau of Statistics emphasized the importance of expanding domestic demand and inspiring businesses to address trade challenges faced by factories.

October’s data presented a mixed picture, with both new export and import orders shrinking for an eighth consecutive month, while industrial output grew by 4.6%, driven by strong performance in autos and restaurant sales. Goldman Sachs noted significant profit divergence across sectors, with furniture firms experiencing an 11.8% decline in profits, while electronics manufacturers saw a 20.8% jump.

The Economist Intelligence Unit’s Xu Tianchen acknowledged three consecutive months of positive profit growth but warned of the sector’s sensitivity to input costs. The central bank and other authorities have called for increased financial support for private companies, emphasizing the need for longer-term structural reforms over pursuing a high growth rate.

China’s stock market responded to the data, with the CSI300 index falling 1.21% and Hong Kong’s Hang Seng losing 1.07%. State-owned firms posted a 9.9% decline in earnings over the first 10 months, foreign firms recorded a 10.2% slide, and private-sector companies saw profits down by 1.9%. Industrial profits data cover firms with annual revenues of at least 20 million yuan from their main operations.