Official statistics released on Saturday revealed that China’s industrial earnings decreased in March and slowed advances for the quarter compared to the first two months, casting doubt on the strength of a rebound for the second-biggest economy in the world.
According to data from the National Bureau of Statistics (NBS), the combined profits of China’s industrial companies increased 4.3% to 1.5 trillion yuan ($207.0 billion) in the first quarter compared to the same period last year. This was less than the 10.2% increase in the first two months.
March’s profit decreased 3.5% on an annual basis. NBS stated during the announcement in March that monthly numbers have extended gains since August 2023, but it did not break out monthly numbers for the months of January through February.
The score was in line with a number of March economic data, including industrial output and retail sales, which suggested that although first-quarter GDP growth was strong, domestic demand was fragile.
Early indications that the economy was picking up steam were progressively replaced by worries about weak domestic demand.
According to Bruce Pang, Chief Economist and Head of Research in Greater China at JLL, manufacturing firms’ ability to extend their investment and their ability to mend their asset and liability structure may be impacted if profit growth slows down further.
According to a statement from NBS, the first-quarter profit increase of 29.1% was driven by the high-tech manufacturing industry. However, the recovery of enterprises’ earnings was not uniform.
From January to March, the automotive manufacturing sector’s profits increased by 32.0% year over year.
The major brands debuted their newest electric cars (EVs) at China’s largest auto show, which kicked off in Beijing on Thursday. This demonstrated how the largest auto market in the world has already made the switch to all-electric vehicles and has no intention of going back.
Chinese electric vehicle battery manufacturer CATL (300750.SZ), opens new tab, reported a profit rebound in the first quarter of April, but its revenue fell for the second straight quarter due to a slowdown in demand and heightened competition.
Citing concerns to state finances as the economy faces growing uncertainty in its transition to new growth models, Fitch has lowered its outlook on China’s sovereign credit rating to negative.
Manufacturing businesses should see an improvement in their financial situation, according to Pang of JLL, as a result of initiatives like widespread equipment replacement.
“(But) the focus of the future policy should be on the demand side rather than the supply side,” he stated.
China’s industrial profit figures include companies whose primary operations generate at least 20 million yuan ($2.76 million) in sales annually.
In the first quarter of the previous year, profits fell 21.4% year over year due to COVID-19.
NBS did not specify the number of entities included in the tally or the names of any businesses whose profits were included.
