CHINA
- Over the weekend, China reported its Industrial profits for September.
- The September figure declined -27.1% YoY following a -17.8% decline in August, marking one of the worst two-month declines in recent history.
- Whilst policies implemented in recent months have tended to focus on the consumer and real estate, it must not be overlooked that corporate China too is suffering and with industrial profits facing such imposing challenges, there is little doubt that this has a knock-on effect with the key strategic investment decisions that corporates will be making looking forward.
- Data out in China has shown the drag of both producer prices and factory gate prices, the latter which has been in material decline for some time.
- When looking at Industrial Profits and its relationship with CPI, the data shows that a decline in Industrial profits tends to lead CPI.
- As China authorities maintain their 5% GDP growth target for this year, there has been some moderate signs of improvement in other areas of the data with industrial production and consumption patterns marginally better.
- There were also some positive signs from the high tech sector in profits surprising to the upside for the first three quarters of the year.
- There is cautious optimism about this performance of the sector whilst recognizing that with a Trump victory in the US election, tariffs and targeted policies could be harmful going forward.
- However, at 4.6% GDP growth for the period of July-September, the improvements may not be enough to hit the target.
249 words