China’s industrial firms saw their profits drop in 2024 for the third consecutive year under deflationary pressures, though an improvement in recent months showed the impact of stimulus measures.
Industrial profits at large Chinese companies declined 3.3% last year after a 2.3% decrease in 2023. A surge of 11% in December helped narrow the full-year contraction, according to a statement from the National Bureau of Statistics on Monday.
Corporate finances have become more strained with the economy in the grip of deflation while China contends with weak consumption and investment demand at home. The pressure on balance sheets is unlikely to ease any time soon as the country faces what’s likely to be the third straight year of economy-wide price declines, which would mark the longest streak in decades.
Industrial profits are a vital gauge of the financial health of factories, mines and utilities, shaping their investment decisions in the months to come. Producer prices have fallen for more than two years and ended 2024 with a 2.2% decrease.
In a reversal from the previous four months, industrial firms reported on-year growth in profits in December. Yu Weining, a statistician at the NBS, attributed the improvement to a broad stimulus package rolled out in September.
Equipment makers and producers of home appliances reported a jump in profits in the fourth quarter thanks to the government’s program to subsidize purchases by individuals and companies of consumer goods and machinery, according to Yu.
Companies such as makers of refrigeration equipment for home use saw their profits soar 175% in the fourth quarter from a year earlier.
Written by: Bloomberg News @Bloomberg
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