China's industrial sector faced a significant setback in November, with profits plunging at the fastest rate in 14 months. This decline highlights the challenges posed by weakening domestic demand, even as exports demonstrated resilience. The official data revealed a 13.1% year-over-year drop in industrial profits, a sharp acceleration from the 5.5% decline in October. This marks the most substantial decrease in profits since September 2021.
The coal mining and washing industry bore the brunt of this downturn, with profits plummeting over 47%, mirroring the impact of falling prices and subdued domestic demand. The National Bureau of Statistics (NBS) data underscores ongoing pressure on corporate margins due to persistent factory-gate deflation and sluggish household consumption. Despite the export sector's better-than-expected performance, the recovery remains uneven, heavily reliant on external demand rather than domestic momentum.
However, there were some positive notes. The automotive industry witnessed a 7.5% profit increase, and high-tech manufacturing stood out with a remarkable 10.0% growth. These sectors, supported by government policies, continue to outperform traditional heavy industries. NBS chief statistician Yu Weining emphasized the need for stronger foundations to sustain profitability recovery in the face of global uncertainty and structural adjustments.
Analysts attribute the profit slump to the broader cooling in activity towards the end of the year. Soft domestic demand remains the primary concern, but there's potential for improvement if companies scale back excessive investment, aligning with Beijing's efforts to combat industrial 'involution'. The export sector may also find some relief, offering a glimmer of hope for the industrial sector's future.
