Chinese Industrial Profits Experience Strong Rebound in Q3 2023

China’s industrial sector has seen a 7.7% increase in profits in the third quarter of 2023, reversing a decline observed over five previous quarters. According to the National Bureau of Statistics (NBS), this surge suggests an improving economic landscape aided by policy measures. In the first nine months, overall industrial profits dropped by 9%, a decrease that has steadily narrowed when compared to previous quarters.
Key Highlights

The National Bureau of Statistics (NBS) released data showing a 7.7% year-on-year growth in China’s industrial profits for the third quarter of 2023. This turnaround ends a trend of five consecutive quarters of decline and indicates a stabilizing economy.

For September 2023 alone, profits registered an 11.9% year-on-year increase. This comes on the heels of a 17.2% spike in August, demonstrating that the upward trajectory is not an isolated incident. NBS statistician Yu Weining attributes this positive change to a combination of supportive macro policies and steady growth in industrial production and market demand.

Although the industrial sector witnessed a 9% year-on-year drop in profits for the first nine months of 2023, this decline has been narrowing. It has lessened by 7.8 and 12.4 percentage points, respectively, compared to the first half and the first quarter of the year.

Among China’s 41 major industrial sectors, 25 have either seen an acceleration in profit growth or a narrowing of the decline in the first three quarters. Specifically, the equipment manufacturing industry, which constitutes 31.5% of total industrial profits, recorded a 0.6% year-on-year growth from January to September.

Notably, the raw material manufacturing industry showed a dramatic improvement. Profits increased by 60.8% in the third quarter, significantly contributing to the overall industrial profit recovery. This sector also saw its profit decline narrow by 18.8 percentage points compared to the first half of the year.

In addition to industrial sectors, consumer goods manufacturing industries also reported good news. Their profits increased by 11.8% in Q3 2023, marking a recovery.

Economists suggest that the positive trend in industrial profits is likely to continue into the fourth quarter, bolstered by a combination of macro policies, expanding domestic demand, and improvements in both supply and demand fundamentals.

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