China's industrial profits faced a sharp 17.8% decline in August, marking the steepest drop in over a year, following a 4.1% rise in July. This downturn reflects the growing economic pressure on the country as weak domestic demand and a sluggish recovery weigh heavily on the manufacturing sector.
The National Bureau of Statistics attributed the sharp fall to a high base effect from the previous year, when profits rose by 17.2%. For the first eight months of 2024, industrial profits increased by just 0.5%, a noticeable slowdown compared with an increase of 3.6% from January to July. Major sectors, such as mining and oil, experienced significant declines, while metal processing, electronics, and food industries saw the largest profit gains.
This economic strain has led to cautious forecasts for China's growth in 2024, with global analysts predicting figures below the government’s target of 5%. In response, China’s central bank has implemented stimulus measures, including a 50-basis point cut in banks' reserve requirements. However, analysts warned more demand-side easing, especially fiscal help, would be vital to restore confidence.
Despite these challenges, some sectors saw improvement. Non-state-owned businesses recorded a 2.6% profit increase, while the profit of foreign industrial firms increased by 6.9% in the January-August period.