Profits at  China’s major  industrial companies  fell  in 2023, reflecting widespread  business difficulties linked to  falling prices and weak demand both at home and  abroad.  

 Industrial profits  of China’s major  companies  fell  2.3% last year  compared with  2022, according to data  released  by the National Bureau of Statistics on Saturday. 

  This  annual  figure contrasts  with  a year-end increase,  after December profits  rose  16.8%  compared to  the same month in 2022.  This is  a slower pace than  November’s  29.5% increase.  Both  Both months reflected a  recovery  in  production compared to the previous year,  when  the  Covid  epidemic broke out nationwide, causing  factories in many major  cities to close.  While China  achieved a  conservative target of  around  5% growth last year,  the  expected post-pandemic boom failed to materialize as  the  property market  crisis  dragged  down  the  second-largest economy.  two worlds come down. This has prompted  Beijing to ramp up measures to  support growth  without flooding the system with so-called  massive stimulus measures.  

 Industrial profits have  improved  since last summer, a sign  that  many companies are  nearing  the end of  their inventory-reduction  cycle. In another positive sign, industrial  production grew  6.8% in December, the fastest pace since 2021.  The year-over-year  decline in producer prices also slowed  compared to  November,  thereby  reducing the  impact on profits.  Total industrial  profit is  determined by changes in  production,  prices and profit margins.  According to official data, industrial manufacturers  increased their  profit  margins  in 2023 by reducing  costs per unit of  income.  

 Signs of deflation  are spreading in  China, casting doubt on  the  sustainability of growing  industrial  profits.  

 Authorities  remain under  pressure to  maintain  stimulus  measures.  Economists  expect  the  required  reserve ratio  to continue to decline for  the rest of the year,  alongside a slight reduction  in  policy interest rates.  The  People’s  Bank of China has  announced  more targeted stimulus  measures  to  direct  money  to  specific sectors of the economy. 

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