China's industrial profits experienced a significant decline in August, marking the first contraction in five months, as the country's economy faces mounting pressures. Official data from the National Bureau of Statistics revealed that profits at large industrial firms fell by 17.8% compared to the same month last year, following a 4.1% increase in July.
The earnings growth for the first eight months of the year rose by only 0.5%, a stark contrast to the 3.6% growth recorded in the January to July period. This downturn has raised alarms about a sluggish economic recovery, prompting global brokerages to lower their growth forecasts for China in 2024 to below the government's target of approximately 5%.
Weak domestic demand, exacerbated by job security concerns and a downturn in the property market, has been identified as a key challenge. Notably, the Inner Mongolia Yili Industrial Group Co reported a 40% drop in its second-quarter net profit, underscoring the economic strain.
In response, China's central bank has initiated its most aggressive stimulus measures since the pandemic, including a 50 basis point cut in banks' reserve requirements. However, analysts emphasize that further demand-side easing and fiscal assistance will be crucial to rebuild market confidence.
Source: Reuters, September 27, 2024