China’s industrial profit growth has indeed slowed due to a combination of factors including the impacts of the virus and significant flooding, as noted in various analyses from 2024 to early 2025:
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Virus Impact: The ongoing effects of the virus, particularly new outbreaks or variants, have continued to disrupt economic activities. Lockdowns, reduced consumer spending, and disrupted supply chains from previous years have left a lasting mark on industrial profits. There’s a noted struggle with industrial output due to these health-related disruptions, creating a volatile environment for businesses. The sudden policy shifts regarding virus control measures have also led to unpreparedness among businesses, impacting their bottom line.Flood Impact: Severe flooding in regions like Guangdong and Henan has directly affected industrial operations by damaging infrastructure and disrupting logistics. This has led to decreased production in affected areas, with impacts on both domestic consumption and exports. The floods have compounded the economic challenges by adding to the cost of recovery and repair, squeezing profit margins further. The natural disasters have been highlighted as one reason for the slowest industrial profit growth since records began, indicating a significant drag on the economy.
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Combined Effects: The combined effect of the virus and floods has led to a scenario where industrial profits have experienced some of their steepest declines in recent history. In 2024, profits at large Chinese companies fell significantly, with November seeing a 7.3% drop year-over-year, marking a concerning trend for the fourth consecutive month. This slowdown in profit growth is seen as part of a broader economic malaise, with expectations of continued pressure unless more substantial policy support is introduced.
The government has responded with some stimulus measures targeted at consumption and infrastructure, but there remains a call for broader, more aggressive policy actions to counteract these negative impacts. The situation underscores the fragility of China’s economic recovery and the challenges in achieving sustainable growth amidst health and natural crises.
