Data released by China’s National Bureau of Statistics (NBS) showed that industrial profits increased 1.4% between January and April, compared with the 0.8% growth over the first quarter.
Official data released on Tuesday shows that China’s industrial profits increased in April, leaving policymakers optimistic about the stimulus packages unveiled over the past months to help the economy from slipping into recession. US President Donald Trump is determined to crush the Chinese economy with an array of tariffs, which have since been paused after Beijing announced its own set of reciprocal tariffs.
However, this escalating trade war is not beneficial for either economy and amid this trade turmoil, it is commendable that China was able to witness some profits. April’s industrial profits are proof that the export-reliant China is on the path to recovery, aided by favourable fiscal policy, particularly since it has been grappling with falling domestic demand and deflation.
Data released by the National Bureau of Statistics (NBS) showed that industrial profits increased 1.4% between January and April, compared with the 0.8% growth over the first quarter. In April, the profits rose to 3%, in comparison to the 2.6% increase in March. Commodities of new energy and new materials supply chains, along with those of high-end manufacturing, are having their time in the sun, which has been possible due to the country’s industrial priorities.
Having understood that, regardless of Trump’s victory, the markets would crash and the global economy would suffer temporarily, Chinese policymakers had been introducing stimulus packages in small doses, as early as September of last year. This helped push investor confidence and domestic demand, with the most recent measures including interest rate cuts and major liquidity injections.
These measures were introduced shortly before Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer were scheduled to meet China’s top economic official, He Lifeng, in Switzerland. Financial Service Company, Moody’s Ratings, however, did not change its negative outlook on China, as tensions with major trade partners could impact its credit profile in the long run. However, Moody’s acknowledged that when the credit rating company had flagged concerns about the health of state-owned firms and local government debt, Beijing officials quickly took note of the issue, after which downgrading was prompted in 2023.
NBS data also shows a 4.4% decline in the profits of state-owned enterprises up to April. Meanwhile, private and foreign companies recorded a growth of 4.3% and 2.5%, respectively. The industrial profit numbers are calculated after assessing firms with annual revenue of at least 20 million yuan from their main operations.
While these profits may portray Asia’s largest economy as heading for recovery, other data released in April indicate that despite exports exceeding expectations, it was offset by shrinking growth in retail, factory output and reduced bank lending. Although there was a forecast of a 1.9% increase in exports, customs data published in May show that Chinese exports rose 8.1% year-on-year in April.
Imports also defied expectations, as the 5.9% expected drop was in reality only 0.2%, indicating that domestic demand was better than anticipated. This good news did not last much longer, as banking data soon revealed that Chinese banks only extended 280 billion yuan as loans in April, compared to the 3.64 trillion yuan which was poured into the economy only a month prior.
While the two largest economies in the world have currently reached a tariff truce, analysts are cautioning that this fragile arrangement can break at any time, causing serious damage to China’s economy. It is estimated that nearly 16 million jobs could be lost if exports to the US plummeted by 50%.
Reuters reported that Yu Weining, an NBS statistician, said in a note accompanying the official data reports that the foundation for sustained and consistent profit growth must be further strengthened. Global challenges are not eliminated, as economic uncertainties, insufficient demand and falling prices pose a great threat to the economy’s recovery.
This industrial profit surge is not indicative of a larger or long-term strategy. Therefore, along with the stimulus, Beijing is compelled to look for other alternatives to ensure its economy stays afloat during these turbulent times.
