China's industrial profits decline 2.3% in 2023 for second consecutive year

Profits at China's industrial firms experienced a 2.3 per cent decrease in 2023, marking their second consecutive annual decline. 

The dip was attributed to sluggish demand both domestically and internationally, adding to the economic challenges amid a major property market downturn and deflationary risks.

Data released on Saturday by the National Bureau of Statistics (NBS) revealed a 4.4 per cent fall in profits during the first 11 months compared to the same period the previous year. 

However, there were some positive indicators towards the end of the year. For December alone, industrial profits saw a 16.8 per cent increase year-on-year, albeit lower than the 29.5 per cent surge observed in November. This uptick extended gains for the fifth consecutive month. 

In 2022, profits had declined by 4 per cent, primarily due to stringent COVID-19 restrictions. 

Despite China's 5.2 per cent economic expansion in 2023, its post-pandemic recovery remained fragile. A prolonged housing market downturn, escalating deflationary risks, and decelerating global growth cast shadows over the outlook for the current year.

In a move to support the fragile economy and address the plummeting stock markets, China's central bank announced a 50-basis point cut to bank reserves on Wednesday, marking the most notable reduction in two years.

Analysts suggest that additional stimulus measures will likely be necessary in 2024 to establish a more robust foundation for economic activity.

The industrial profit figures encompass companies with annual revenues of at least 20 million yuan ($2.8 million) from their primary operations.

(With Reuters Inputs)