Asia Pacific Economic Research27 December 2023J P M O R G A Nwww.jpmorganmarkets.comEmerging Markets Asia, Economic and Policy ResearchJi Yan(852) 2800-7673ji.yan@jpmorgan.comHaibin Zhu(852) 2800-7039haibin.zhu@jpmorgan.comGrace Ng(852) 2800-7002grace.h.ng@jpmorgan.comTingting Ge(852) 2800-0143tingting.ge@jpmorgan.comJPMorgan Chase Bank, N.A., Hong Kong Branch•Industrial profits grew 29.5%oya in November, registering the fourth consecutive month of positive growth...•… led by equipment manufacturing and raw material manufacturing sectors•Industrial profits recovery is expected to continue into 2024China�s industrial profits recovery accelerated in November. The National Bureau of Statistics (NBS) announced that total industrial profits (including all industrial companies with annual sales from principal business exceeding 20 million yuan) contracted 4.4%oya in Jan-Nov, narrowing from the 7.8%oya decline in Jan-Oct. Concurrently, accumulated sales revenue grew 1.0%oya, following +0.3%oya in Jan-Oct. Cost of sales increased by 1.1%oya. Profit margin increased to 5.82% in Jan-Nov, compared to 6.09% in full-year 2022. The NBS estimates that industrial profits increased by 29.5%oya in November, following +2.7%oya in October, +11.9%oya in September, and +17.2%oya in August. Meanwhile, sales revenue increased 6.1%oya in November, following +2.5%oya in October. Accumulated industrial profits contraction across ownership types narrowed, while year-to-date profits of private enterprises turned positive. % change20212022Jun-23Jul-23Aug-23Sep-23Oct-23Nov-23Profit growth (%oya, ytd)34.3-4.0-16.8-15.5-11.7-9.0-7.8-4.4Profit growth (%oya)-8.3-6.717.211.92.729.5Sales revenue (%oya, ytd)19.45.9-0.4-0.5-0.30.00.31.0Cost of sales (%oya, ytd)19.17.10.50.20.20.30.61.1Profit margin (%)6.816.095.415.395.525.625.675.82Source: NBSIndustrial enterprise profit growthMonthly industrial profit growth remained positive for four months in a row, attributable to the above-expectation industrial activities, low base effect, and growth-supportive policiesNovember industrial activity beat expectations again, while PPI stayed in annual deflation territory. China�s November activity data shows a mixed and rather unbalanced growth picture, with upside surprise in IP, disappointing retail sales, with moderate FAI growth amid ongoing drag from real estate FAI. Industrial production beat expectations and rose 6.6% oya in November. In sequential terms, we estimate that IP rose notably by 1.5% m/m sa in November, following the gain of 0.6% m/m sa in October. The solid industrial activity growth supported the recovery in industrial sales revenue and profits. Meanwhile, PPI stayed in deflation territory, falling 3.0%oya in November, and down 0.4% m/m sa in sequential terms. The latest easing in global energy prices has dragged the energy-related PPI components, while producer prices for domestic industrial materials and See page 5 for analyst certificati...
