China industrial profits drop 5.5% in October, worst level in five months

Profits of industrial companies in China fell in October The Office for National Statistics said on Thursday.As manufacturers grapple with renewed uncertainty in trade relations with the United States and Beijing’s campaign to rein in excess capacity.

Industrial profits fell 5.5% year-on-year in October, their biggest fall since June, reversing the momentum seen in September when the figure rose 21.6%, the most significant jump since November 2023.

Official data showed that profits of major industrial companies rose 1.9% in the first ten months of the year compared to a year earlier, slowing from a 3.2% increase in the January-September period.

Trade tensions between China and the United States had escalated that month over export controls, with US President Donald Trump threatening 100% tariffs on imports from China, before the two economic superpowers reached a deal in South Korea.

China’s manufacturing activity contracted more than expected in October, with the official manufacturing purchasing managers’ index falling to a six-month low of 49.0. A reading above 50 indicates growth, while a reading below indicates contraction.

While manufacturers have found some relief from the trade deal signed between Trump and Chinese leader Xi Jinping, which reduced tariffs on Chinese products, weak domestic demand and uncertainties in global trade continue to cast a shadow over the trade outlook.

China signaled this month that it would ban all imports of Japanese seafood due to a diplomatic row over Taiwan.

China’s consumer prices unexpectedly returned to growth in October after remaining in negative territory for most of the year, rising 0.2% from a year ago. Core inflation, excluding food and energy prices, increased by 1.2 percent Highest level since February 2024.

But the reality was less rosy than the core inflation reading suggested, according to Ting Lu, Nomura Bank’s chief China economist. Lu estimated that about a quarter of the 1.2 percent core inflation readings “have almost nothing to do with domestic consumption” but are mainly driven by rising gold prices.

The “underestimated decline in rents also contributed to the exaggeration of headline inflation data,” Lu said, suggesting the country has been mired in a “mild recession” since late 2022.

“It will take more time for China to truly break out of the deflationary predicament it currently faces, especially as economic growth has been stumbling since mid-2025,” Lu said. he added.

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