In November 2023, China’s National Bureau of Statistics (NBS) released the latest data on the financial performance of large-scale industrial enterprises, revealing that profits had decreased by 7.3% year-on-yearHowever, this was a smaller decline compared to October, marking a 2.7 percentage-point narrowing in the rate of declineThe figures underscore a mixed picture of China’s industrial landscape, with signs of improvement in certain sectors but ongoing challenges due to a high base from last year and broader macroeconomic conditions.
A Glimpse at the Data
For the month of November, industrial enterprises with annual revenues over 20 million yuan collectively saw their revenue grow by 0.5% compared to the same period in 2022. This marked a significant rebound from October, when revenues had declined by 0.2%. Over the first eleven months of 2023, total revenue for these enterprises had increased by 1.8%, signaling steady, albeit modest, growth.
In terms of profits, the decline of 7.3% year-on-year was certainly concerning, but it also showed a recovery from earlier months
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Specifically, the decline in profit margins had slowed across most major sectorsMining profits, which had been hit hard in previous months, showed a notable improvement, with the decline narrowing by 10.9 percentage points compared to OctoberMeanwhile, manufacturing profits continued to fall, but at a slower pace of 0.3 percentage pointsThe electric power, heat, gas, and water production sectors even saw a growth of 4.8%, a promising sign amid the broader industry-wide challenges.
Notably, the total profit for industrial enterprises during the first 11 months of 2023 reached 6.67 trillion yuan, though this was still a 4.7% decline compared to the same period in 2022. Despite these figures, experts remain optimistic that China’s industrial economy is beginning to stabilize, buoyed by the government’s strategic policies aimed at boosting production and improving efficiency.
Policy Impacts on Industrial Enterprises
The data reflects a combination of factors influencing the industrial economy, including effective implementation of stock policies, accelerated rollouts of new incremental policies, and the cumulative effects of government support measures
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According to Yu Weining, an NBS statistician, the industrial sector benefitted from a combination of “policy combination effects,” which led to steady growth in production and a continued recovery in enterprise profitsThis recovery is expected to be further supported by the deepening of China’s high-tech, intelligent, and green manufacturing initiatives.
One of the bright spots in China’s industrial performance has been the high-end manufacturing sectorThis sector’s profitability has surged due to a steady demand for advanced equipment and smart technologiesNotably, sectors such as optoelectronic devices manufacturing and aerospace equipment saw profits grow by 41.1% and 14.3%, respectivelyThe accelerated production of intelligent and automated products has also played a pivotal role in driving profitability in related industriesFor example, the wearable smart devices manufacturing industry saw profits jump by 90.3%, while the production of measurement and drawing instruments surged by 31.3%. Similarly, green technologies, such as the production of lithium-ion batteries and environmental monitoring instruments, also saw remarkable profit increases, with respective growth rates of 35.3% and 17.9%.
The government’s policy toolbox, including measures to promote industrial upgrading and technological innovation, has proven effective in stimulating growth in some areas
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This is reflected in the strong performance of the specialized equipment manufacturing sector, which saw profits soar by 36.7% in November aloneKey sub-sectors, such as electronic and electrical machinery, mining and metallurgy equipment, and chemical processing machinery, registered impressive profit growth rates of 110.6%, 90.4%, and 35.7%, respectively.
The effects of the “replacement policy,” a major policy aimed at encouraging the replacement of old equipment, have also been noticeable in consumer goods manufacturingThe household appliance industry, for instance, experienced substantial profit growthThe production of home cleaning devices, home refrigeration equipment, and air conditioners saw profits increase by 311.4%, 82.9%, and 11.1%, respectively.
Consumer Goods Manufacturing – A Bright Spot
Among the various sectors, consumer goods manufacturing stood out as a particularly strong performer
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As China’s macroeconomic policies took effect, industrial exports continued to rise, contributing to a 22.0% year-on-year profit growth in this sector in NovemberThis growth drove a 3.7 percentage-point increase in the overall profit for industrial enterprisesWithin the consumer goods sector, 8 out of 13 industries showed profit growth, with the beverage and alcoholic drink sector seeing a massive 292.3% profit surge, largely due to the receipt of investment income by some companiesAdditionally, industries such as chemical fiber, cultural and educational products, and textiles also recorded strong profit growth, rising by 16.3%, 14.7%, and 8.2%, respectively.
This performance can be seen as a testament to the resilience of certain segments of China’s manufacturing sector, which are benefiting from both domestic consumption and export demandThe government’s targeted policies, including support for technological innovation and green production, continue to have a significant impact on the industrial landscape, fostering growth in emerging and high-potential industries.
Looking Ahead: Challenges and Opportunities
Despite these positive signs, the overall picture for China’s industrial enterprises remains one of cautious optimism
As noted by Yu Weining, while industrial profits are still in a downward trajectory, the continued narrowing of the profit decline in November signals that the policies implemented over the past year are beginning to take effectThe key to sustaining this recovery, according to experts, lies in further implementation of policy measures and the cultivation of new growth driversThe Central Economic Work Conference, which set the agenda for China’s economic policies in the coming year, emphasized the importance of ensuring industrial stability and continuing the policy push for technological innovation, green development, and supply-side reforms.
Looking ahead, the industrial sector is likely to see continued pressure from both global and domestic challenges, including supply chain disruptions, fluctuating commodity prices, and the ongoing adjustments needed to meet China’s ambitious environmental and technological goals