China’s industrial profits fall in October after two months of strong growth

[BEIJING] China’s industrial profits contracted in October, after double-digit growth in the previous two months, official data showed on Thursday, as businesses grappled with lacklustre domestic demand and an export downturn.

The drop could fuel calls for more government support measures to encourage domestic consumption and wean the manufacturing powerhouse off its reliance on exports as China confronts tariffs and growing trade barriers.

Industrial profits at China’s industrial firms declined 5.5 per cent year-on-year in October, according to National Bureau of Statistics data, after jumping 21.6 per cent in September and 20.4 per cent in August.

The reading came in weaker than anticipated, said Lynn Song, chief economist for Greater China at ING, who said mining profits continued to drag on overall corporate profits.

“SOEs have generally seen slower profit growth compared to private-owned enterprises and foreign-owned enterprises so far this year,” Song said.

The reversal in October was due to factors including a higher base effect last year, said NBS statistician Yu Weining.

Among the sectors on a notable downtrend were mining and ancillary activities whose year-to-date profits dropped 14.8 per cent on year after a 7.4 per cent gain in the first nine months, NBS data showed.

The downturn highlights persistent domestic challenges facing the world’s second-largest economy, even as US-China trade tensions show signs of easing. Growth momentum has faltered sharply, with third-quarter economic expansion slowing to its weakest pace in a year.

Growth in industrial profits was 1.9 per cent in the first 10 months versus a 3.2 per cent rise in the January-September period.

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Earlier this month, official data showed underwhelming growth in October retail sales despite an eight-day national holiday and the start of the month-long Singles’ Day sales festival.

Producer deflation eased in October but prices remained in contraction compared with the same period last year, and factory output grew at the weakest annual pace since August 2024.

Chinese leaders have signalled a sharper shift towards supporting consumption over the next five years, but have yet to inject new large-scale stimulus to this end.

The government announced plans this month to boost consumption, detailing measures that included promoting upgrades of consumer goods in rural areas. Pets, anime and toys were part of its latest salvo in a piecemeal attempt to boost spending.

Meanwhile, elevated unemployment rates for young people as well as a prolonged property market downturn continue to dampen sentiment.

State-owned firms saw profits unchanged in the first 10 months. Private-sector firms posted a 1.9 per cent increase while foreign firms recorded a 3.5 per cent rise, the data showed.

Industrial profit figures cover firms with annual revenue of at least 20 million yuan (S$3.7 million) from their main operations. REUTERS