The latest official data from China's National Bureau of Statistics reveals that industrial profits in the country had a 4.3% increase in the first quarter of the year compared to the previous year. Despite this growth, the pace of profit increase slowed down significantly from the 10.2% rise seen in the first two months of the year. March saw a 3.5% year-on-year decline in profits, though specific monthly breakdowns for January and February were not provided in the data release.
The gradual decline in industrial profits has added to concerns over an uneven economic recovery in China, with signs of momentum giving way to worries about weak domestic demand. Economic indicators for March, including retail sales and industrial output, pointed towards challenges in stimulating strong consumer activity despite solid first-quarter GDP growth. This shift comes amid cautious signals from senior officials at China's central bank regarding credit and a warning from Fitch, which downgraded its outlook on China's sovereign credit rating to negative due to increasing uncertainty in the economy's transition to new growth models.
As a reflection of the broader economic landscape, major industrial players like Chinese electric vehicle battery company CATL also faced challenges in the first quarter. While CATL's profit returned to growth, its revenue decreased for the second consecutive quarter as a result of slowing demand and heightened competition in the market. This slowdown in profits and revenue growth indicates a complex economic environment that could impact companies across various sectors. The industrial profit data released by the National Bureau of Statistics covers firms with annual revenue of at least 20 million yuan ($2.76 million) from their primary operations, providing insights into the performance of China's key industrial players in the first quarter of the year.