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China’s industrial profits last month fell at their fastest pace in more than a year, as President Xi Jinping’s economic planners struggled to contain the fallout from industrial overcapacity and lacklustre consumer confidence.
Profits at industrial companies with annual revenues of more than Rmb20mn ($2.8mn) fell 13.1 per cent in November compared with a year earlier, data from the National Bureau of Statistics showed on Saturday, down from a 5.5 per cent decline in October.
The November slump brought profit growth for the year to date down to 0.1 per cent above the same period in 2024, down from 1.9 per cent growth in the January-to-October period.
China’s economy has struggled to find long-term drivers of strong growth in the wake of the collapse of the debt-fuelled property sector, which is now entering its fifth year of crisis.
While China has relied on exports of low-cost goods to boost headline growth, the world’s second-biggest economy has been wracked by deflationary pressures, weak domestic demand and falling investment. The producer price index has been mired in negative territory for three years.
On Sunday, China’s finance ministry reiterated a pledge for a more proactive fiscal policy in 2026 but provided few commitments on the scale or scope of expanded expenditure.
In a statement following a two-day policy conference, the ministry said that as part of the drive to boost consumption it would continue to support trade-in programmes for consumer goods. While no further detail was given, the statement signals a potential extension of a programme that was launched in 2024 and expanded in 2025.
The ministry also said it would increase funding for investment in “new quality productive forces”, a Communist party phrasing that loosely refers to overhauling traditional manufacturing via innovation and development of cutting-edge technologies.
Lan Fo’an, the finance minister, promised fiscal support for employment and income growth as well as social security, health and education.
The latest factory data highlights the challenge for policymakers to boost confidence among the country’s companies and consumers, despite a truce in the US-China trade war and a boom in high-tech manufacturing exports.
Yu Weining, NBS chief statistician, said China’s economy faced “structural adjustment pressures” as it transitioned from “old to new” growth drivers, adding that the international environment was also marked by “many unstable and uncertain factors”.
The central government in Beijing has long resisted calls from economists — both inside and outside China — to unleash broad-based stimulus and roll out deep social security reforms to boost sentiment and kick-start the economy.
It has also increasingly taken aim at what authorities call neijuan, or “involution” — excessive industrial competition that they blame in part for overproduction in some sectors that is driving down prices.
In an article published in Qiushi, the flagship magazine of the Communist party’s central committee, Xi this month urged officials to work more urgently to address the problem of insufficient domestic demand.
“Expanding domestic demand is related to both economic stability and economic security; it is not an expedient measure but a strategic move,” he said.
Xi also reiterated calls for officials and companies to exercise more discipline over investments, following earlier criticism of industrial over-investment, which has resulted in brutal price wars and unfair treatment of suppliers.
Earlier this month, the NBS reported that fixed asset investment declined 2.6 per cent in the January to November period from a year earlier. Retail sales, an indicator of household demand, expanded 1.3 per cent in November on a year earlier, the slowest pace of growth since December 2022. Both data points were below analysts’ expectations.
The latest NBS data highlighted some bright spots in China’s manufacturing industries. High-tech manufacturing and the auto industry posted year-on-year improvements of 10 per cent and 7.5 per cent respectively.
Additional contributions from Tina Hu in Beijing
