For the first ten months of the year, profits at major industrial firms grew 1.9% from a year ago, the official data showed, decelerating from a 3.2% rise<\/a> in the January to September period. <\/p>\n Trade tensions between China and the U.S. had escalated that month over export controls, with U.S. President Donald Trump threatening additional 100% tariffs on imports from China, before the two economic superpowers reached a deal<\/a> in South Korea at the month’s end. <\/p>\n The mining sector saw profits plunge 27.8% in the January to October period, while profits for the manufacturing and utilities sectors, comprising suppliers for electricity, heat, fuel and water, rose 7.7% and 9.5% respectively. <\/p>\n Profits for carmakers gained 4.4% in the first ten months of the year, compared to a 3.4% climb<\/a> in the first nine months. <\/p>\n Profits at state-owned enterprises were flat, compared with gains of 3.5% for industrial firms with foreign investment, including those with investment from Hong Kong, Macau and Taiwan, and 1.9% for private companies. <\/p>\n Yu Weining, chief statistician at NBS, attributed the drop in October to high-base effects<\/a> from last year and rapid expansion in corporate spending. <\/p>\n China’s manufacturing activity contracted more than expected<\/a> in October, with the official manufacturing purchasing managers’ index slumping to a six-month low of 49.0. A reading above the 50 benchmark indicates growth, while one below that suggests contraction.<\/p>\n Tepid consumer demand China’s consumer prices unexpectedly returned to growth in October<\/a>, rising 0.2% from a year ago, after staying in negative territory for most of the year. Core inflation, stripping out food and energy prices, jumped 1.2%, the highest since February 2024<\/a>. <\/p>\n The reality, however, was less rosy than the core inflation reading suggested, according to Ting Lu, chief China economist at Nomura Bank, who estimated that about a quarter of the 1.2% core inflation readings had “almost nothing to do with local consumption” but were mainly caused by surging gold prices. <\/p>\n The “underestimated decline of rents also contributed to the overstatement of headline inflation data,” Lu said, suggesting that the country has been mired in a “moderate recession” since late 2022. <\/p>\n “It will take more time for China to truly escape the deflationary conundrum it currently faces, especially as economic growth has stumbled since mid-2025,” Lu added. <\/p>\n Growth falters<\/p>\n The economy has slowed significantly, expanding just 4.8%<\/a> in the third quarter, and recent indicators suggest it has lost further momentum at the start of the fourth quarter. <\/p>\n Retail sales grew 2.9% in October, slowing for a fifth straight month<\/a> and marking the weakest growth in over a year. Fixed-asset investment shrank 1.7% for the first ten months of the year, unseen since 2020 during the pandemic. Industrial output also expanded by a smaller-than-expected 4.9%. <\/p>\n Meanwhile, the urban unemployment rate remained elevated at 5.1% in October<\/a>. <\/p>\n Chinese policymakers have signaled a shift towards boosting consumption over the next five years, but have yet to roll out new meaningful stimulus. Economists widely expect Beijing to hold off large-scale stimulus as the economy is on track to hit its growth target of “around 5%” this year<\/a>. <\/p>\n “Policymakers don’t want to miss or over-achieve the target,” said Larry Hu, chief China economist at Macquarie Group, expecting China’s economy may continue to grow 5% in 2026 on robust export growth. <\/p>\n That said, “deflationary pressure” will likely continue to weigh on the economy as strong external demand reduces the urgency for domestic stimulus, Hu added. <\/p>\n \t\t\t![\"Made](\"https:\/\/public.flourish.studio\/resources\/made_with_flourish.svg\")
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