China’s industrial profits plunged 17.8% in August compared to the previous year, signaling growing concerns over the country’s economic slowdown.
The sharp decline, reported by the National Bureau of Statistics on Friday, comes after a brief recovery in July when profits saw a 4.1% year-on-year increase — the fastest pace in five months.
This drop highlights the significant challenges facing China’s factories, mines, and utilities: sluggish domestic demand, a prolonged housing crisis, and rising unemployment weighing on the world’s second-largest economy.
For the first eight months of 2024, profits at large industrial firms grew by a modest 0.5%, reaching 4.65 trillion yuan ($663.47 billion), a notable decrease from the 3.6% growth reported in the year’s first seven months.
This slowdown has heightened concerns that China may struggle to meet its full-year GDP growth target of around 5%, which was set by Beijing earlier this year.
In response to the ongoing economic challenges, China’s government has taken steps to bolster growth.
On Thursday, top officials, including President Xi Jinping, emphasized the need to halt the property market downturn and increase fiscal and monetary support.
The People’s Bank of China followed through by cutting the reserve requirement ratio (RRR) — the amount of cash banks must hold — by 50 basis points.
Additionally, the central bank lowered the 7-day reverse repurchase rate by 20 basis points to 1.5%, down from 1.7%, to inject liquidity into the market.
The latest economic data reveals that China’s industrial activity, retail sales, and urban investment are growing slower than anticipated.
Retail sales increased by just over 2% in August, while industrial production grew by 4.5% compared to a year ago.
Meanwhile, real estate investment dropped by 10.2% through August, maintaining the same pace of decline as in July.
The urban unemployment rate also rose to 5.3%, up slightly from 5.2% in the previous month.
The combination of weak consumer spending, a struggling property market, and rising joblessness is creating a challenging environment for China’s industrial sector.
As Beijing ramps up efforts to stabilize the economy, investors and analysts will be closely watching for signs of recovery or further deterioration in the coming months.
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