China’s Oct Industrial Profits Narrow Decline, But Headwinds Loom

• China's industrial profits fell again in October but less sharply than the previous month as deflation pressures dragged, while demand remained soft in the crisis-hit $19Tn economy. Fresh headwinds from additional U.S. tariffs could also threaten China's industrial sector next year, reducing export earnings.
• The sprawling sector, which includes mining, processing and manufacturing companies, has struggled to stay profitable in the face of feeble domestic demand hit by a years-long property crisis, unemployment and rising trade tensions.
• According to National Bureau of Statistics (NBS) data, Industrial profits in October fell 10% year-on-year (YoY), better than a 27.1% slump in September. These consecutive months of YoY declines meant earnings slid 4.3% in January-October of 2024 versus a 3.5% decline in January-September.
• Separate economic indicators earlier this month pointed to broadly soft demand, with consumer prices at their weakest in four months while industrial output continued to trend downward and new home prices fell at their fastest pace in nine years.
• Outside of the tepid economic data, China's export earnings will also be squeezed by U.S. tariffs, hammering manufacturers. Trump could impose 40% tariffs on imports from China, a Reuters poll of economists showed. If tariffs are gradually increased to 40% and not all at once, expedited shipments ahead of new tariffs could help offset the impact of subsequently higher levies, resulting in a 2025 export decline of 1.7%, according to Minsheng. If only an additional 10% tariff is imposed, China's 2025 export growth could come in at 0.2%, the Chinese securities firm said.

(Source: Reuters)