Decline of Industrial Profits in China

BEIJING (Reuters) – Profits at China’s industrial firms fell for a third straight year in 2024, according to official data released on Monday. This decline highlights the urgent need for policymakers to enhance support for an economy facing tariff threats from the new Trump administration.

Industrial profits rose by 11% in December compared to the same month last year, following a significant 7.3% drop in November, based on data from the National Bureau of Statistics (NBS).

For the entire year, earnings at industrial firms declined by 3.3%, which follows a 4.7% dip recorded during the January-November period. This is a worsening from the 2.3% decline in 2023.

China’s GDP grew by 5% last year, meeting the official target due to extensive government stimulus measures. Nevertheless, the economy has struggled with a sluggish property market, weak domestic demand, and fragile business confidence.

Factory-gate prices in 2024 experienced another year of decline, negatively impacting corporate profits and workers’ wages. In the second half of the year, policymakers implemented several rounds of economic stimulus measures, including the expansion of a consumer goods trade-in scheme aimed at boosting demand.

December’s economic data indicated uneven growth, with industrial output outperforming retail sales while the unemployment rate rose slightly. Furthermore, exports gained momentum in December, partly driven by factories sending inventory overseas in anticipation of increased trade risks under Trump’s presidency.

U.S. President Donald Trump, upon taking office on January 20, indicated that his administration was considering a 10% punitive tariff on Chinese imports the following day.

Profits at state-owned firms dropped by 4.6% in 2024, while profits at foreign enterprises fell by 1.7%, and private-sector companies experienced a slight rise of 0.5% in earnings based on NBS data.

Industrial profit figures include firms with annual revenues of at least 20 million yuan ($2.74 million) from their primary operations.

($1 = 7.3125 Chinese yuan renminbi)