China's industrial sector is currently facing significant challenges, with profits experiencing a sharp decline. In September, industrial profits fell by 27.1% compared to the previous year, marking the largest decline since March 2020. This follows a 17.8% drop in August, indicating a troubling trend for the manufacturing industry.
The decline in profits can be attributed to insufficient demand and a significant drop in producer prices. The first nine months of the year saw a 3.5% decrease in industrial profits year-on-year. Sectors such as upstream materials and automobiles are particularly affected.
China's economy grew by 4.6% in the third quarter, the slowest pace since early 2023. This raises concerns as Beijing aims for a target of around 5% economic growth for 2024. Measures are being implemented to stimulate growth, including potential fiscal stimulus.
The decline in industrial profits is compounded by deflationary pressures, with the producer price index falling by 2.8% in September. This situation calls for more aggressive policy measures to support the industrial sector. The government's response to these challenges will be crucial in determining the trajectory of growth in the coming months.