China's Industrial Profits Show Uneven Recovery
China's industrial profits experienced a slowdown in growth during the first quarter of 2023, indicating an uneven recovery for the world's second-largest economy. Profits rose by 4.3% compared to the same period in 2022, a significant decrease from the 10.2% growth observed in the first two months of the year.
This slowdown is further emphasized by the 3.5% year-on-year decline in profits during March. While the National Bureau of Statistics (NBS) did not provide a breakdown of monthly figures for January and February, they previously reported that monthly profits had been increasing since August 2022.
This trend aligns with other economic indicators for March, such as retail sales and industrial output, which suggest weak domestic demand despite solid first-quarter GDP growth. Initial signs of economic momentum have gradually given way to concerns about sluggish domestic demand.
The slowdown in industrial profits has prompted caution from China's central bank, which has expressed concerns about the weakening real credit demand. Additionally, Fitch has downgraded its outlook on China's sovereign credit rating to negative, citing risks to public finances as the economy faces increasing uncertainty in its shift to new growth models.
These developments highlight the challenges China faces in achieving a sustainable and balanced economic recovery. While the initial months of 2023 showed promising signs, the recent slowdown in industrial profits and other economic indicators raises concerns about the long-term trajectory of the Chinese economy.