On October 27, 2024, the official data released by the Chinese Communist Party (CCP) shows a 27.1% year-on-year decrease in profits for China’s industrial enterprises above a certain scale in September. This marks the second consecutive month of decline in this data. As a result, profits for industrial enterprises above a certain scale from January to September have accumulated a 3.5% year-on-year decrease.
Overall, in the first nine months of this year, profits for industrial enterprises above a certain scale have seen a cumulative year-on-year decline of 3.5%, which is lower than the previous figure by 4.0 percentage points. This marks the first time this year that such a cumulative year-on-year decrease has been recorded in this data.
The data indicates that profit growth for different types of enterprises continues to slow down. State-owned enterprises achieved a total profit of 1.72359 trillion yuan, a 6.5% year-on-year decrease; shareholding enterprises achieved a total profit of 3.88723 trillion yuan, down by 4.9%; foreign, Hong Kong, Macao, and Taiwanese investment enterprises achieved a total profit of 1.30364 trillion yuan, a growth of 1.5%; private enterprises achieved a total profit of 1.42272 trillion yuan, a decrease of 0.6%.
Profit performance for the three major categories of enterprises has all exhibited varying degrees of decline. In the first three quarters, profits in the mining industry saw a year-on-year decline of 10.7%, with a 1.5 percentage point increase in the rate of decline; manufacturing industry profits shifted to a decline year-on-year, with the growth rate decreasing by 4.9 percentage points to -3.8%; profits in the electricity, heat, gas, and water production and supply industry saw a slowdown in year-on-year growth, decreasing by 2.6 percentage points to 12.1%.
Furthermore, due to the continuous rise in industrial enterprise costs, profit margins have further weakened. From January to September, the cost per 100 yuan of operating income for industrial enterprises above a certain scale was 85.38 yuan, an increase of 0.27 yuan year-on-year, a reduction of 0.01 yuan compared to the previous value; the expenses per 100 yuan of operating income were 8.46 yuan, an increase of 0.08 yuan year-on-year, an increase of 0.05 yuan from the previous value; the operating income profit margin during the same period stood at 5.27%, a year-on-year and month-on-month decrease of 0.31 and 0.07 percentage points, respectively.
Yi Weining, a statistician from the National Bureau of Statistics Industrial Department, stated that the decline in profits is mainly attributed to multiple factors such as insufficient market effective demand, declining industrial product prices, and a significant increase in the base compared to the same period since August. The rapid increase in enterprise costs compared to revenue growth has led to a decline in gross profit, insufficient support for profit growth.
Yi Weining believes that there are primarily three reasons for the decline in enterprise profits: from a price perspective, industrial product factory prices have continued to stagnate, with the producer price index for industrial products in September continuing to expand, putting significant pressure on corporate income and profit; secondly, from an income perspective, operating income for industrial enterprises above a certain scale from January to September increased by 2.1%, a growth rate that is 0.3 percentage points lower than that of January to August; thirdly, from a cost perspective, the rapid increase in enterprise costs compared to revenue growth has resulted in a decline in gross profit, lacking sufficient support for profit growth.
Although the official data released by the CCP shows a decline in industrial enterprise profits, it is widely recognized that the CCP’s National Bureau of Statistics has a history of embellishing and falsifying publicly released economic data. Therefore, the exact data remains unknown to the outside world.
In China, industrial enterprises above a certain scale refer to industrial legal entities with annual main business income of 20 million yuan or more.