China’s Industrial Profit Increase Weakens: Why?

China’s Industrial Profit Increase Weakens: Why?

The National Bureau of Statistics said on Monday that the profit growth rate of China’s industrial enterprises in November was much slower. It was under pressure from the falling prices of some raw materials, the weak real estate market, and weak consumer demand.

Profits in November increased by 9.0% year-on-year to US$126.54 billion, far below the 24.6% increase reported in October.

From January to November, the profits of industrial enterprises increased by 38.0% year-on-year to 7.98 trillion yuan. It was lower than the 42.2% increase in the first ten months of 2021.

Zhu Hong, a senior statistician at the National Bureau of Statistics, said that the country’s efforts to cool down the soaring wholesale prices in November had alleviated cost pressures on downstream industries. These restrictions mean that the mining and raw materials industries have weakened their contribution to overall profit growth.

Driven by the government’s crackdown on runaway commodity prices and the easing of power squeeze, China’s hot factory door inflation cooled slightly in November as Beijing scrambled to mitigate the severe economic impact of soaring costs.

China Lost Momentum After a Strong Recovery from The Pandemic Last Year

The housing recession intensifies, supply bottlenecks persist, and strict COVID-19 restrictions hit consumer spending. Hence, the world’s second-largest economy faces multiple challenges.

The country’s real estate crisis has also damaged the steel industry. Meanwhile, cement, glass, and household appliances remain vulnerable to falling demand.

China’s top leaders pledged to stabilize the economy by 2022. They plan to keep growth within a reasonable range at an important agenda-setting meeting this month.

This month, the People’s Bank of China cut the cash reserves banks must hold. The bank also lowered the one-year benchmark lending rate to stimulate economic growth.

Industrial profit data covers large enterprises with more than 20 million yuan annual primary business income.