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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