China Sees Slower Growth in Industrial Profits During First Quarter

China's industrial profits witnessed a 4.3% year-on-year increase in the first quarter, according to the National Bureau of Statistics (NBS). However, this growth rate represents a deceleration from the 10.2% rise seen in the initial two months of the prior year. Moreover, industrial profits took a downturn with a 3.5% year-on-year decline in March, reflecting signs of weak domestic demand and a challenging export environment.

The first quarter's performance contributes to a broader picture of an uneven economic recovery within China. The NBS had indicated a continuation of profit gains since August of the previous year, but the March figures suggest volatility in industrial profitability. Large-scale Chinese companies saw their profits slow, with a drop in March tempering the post-Covid rebound observed in the early months.

Adding to the concerns about China's economic prospects, Fitch Ratings has downgraded its outlook on China’s sovereign credit rating from stable to negative. This decision underscores the perceived risks to public finances and the uncertainties that come with China's ongoing transition towards new growth models. The credit rating agency has highlighted the potential challenges the country faces as it aims to balance economic reforms with maintaining financial stability.