China industrial profits fall 13.1% in November as deflation pressures mount

China’s industrial profits fell 13.1% year on year in November, marking a second consecutive monthly decline and underscoring mounting pressure on corporate earnings from cooling domestic demand and persistent industrial deflation.

The drop followed a 5.5% decline in October, according to data released Saturday by the National Bureau of Statistics (NBS). While the fall was slightly milder than Bloomberg Economics’ forecast of a 15% drop, it still signals a fragile recovery for the world’s second-largest economy.

For the January–November period, profits at industrial enterprises above designated size edged up just 0.1% year on year to about $920 billion (¥6.63 trillion), down sharply from the 1.9% growth recorded in the first 10 months of the year. The slowing momentum reflects weakening consumption, subdued investment, and continued price pressures across key sectors.

Manufacturing growth

Sector performance remained uneven. Manufacturing profits rose 5% in the first 11 months, supported by stronger performance in advanced industries such as computer, communications and electronic equipment manufacturing, where profits jumped 15%, as well as automobile manufacturing, which grew 7.5%. Utilities also remained resilient, with profits in electricity and heat production and supply rising 8.4%.

In contrast, the mining sector continued to drag, with profits plunging 27.2%, led by steep declines in coal mining and washing, down 47.3%, and oil and gas extraction, which fell 13.6%. Traditional industries such as chemicals, textiles, and non-metallic minerals also posted notable profit contractions.

Financial indicators point to rising operational strain. From January to November, industrial firms generated about $17.4 trillion (¥125.34 trillion) in operating revenue, up 1.6%, while costs rose faster at 1.8%, squeezing margins. The average profit margin slipped to 5.29%, down 0.08 percentage points from a year earlier. Accounts receivable climbed 5.5%, inventories rose 4.6%, and both inventory turnover days and receivables collection periods lengthened, signaling slower cash flow.

Investment concerns

At the end of November, total industrial assets reached about $26.3 trillion (¥189.28 trillion), while liabilities rose to about $15.3 trillion (¥109.96 trillion), pushing the asset-liability ratio slightly higher to 58.1%.

Economists warn that the sharper profit contraction in November could further weigh on investment and hiring. However, policymakers have so far refrained from launching aggressive stimulus, as China’s around 5% annual growth target appears within reach. Looking ahead, analysts expect only modest monetary easing and limited fiscal expansion next year, after leaders struck a cautious tone on stimulus at a key policy meeting earlier this month.

About The Author

Nathaniel Alexander Abaño

See author's posts