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Iris Pang, economist at ING, notes that China’s industrial profits fell 3.4% YoY YTD in April.

Key Quotes

“The fall in profits has continued since November 2018, except for in March (13.9%YoY YTD). We believe this falling profit trend will continue for most of 2019.”

“Examining the details by industry over  several months, we find that the falls in profits in some sectors are structural.”

“With falling business opportunities from other countries in the technology sector, industrial profits in May 2019 could drop to 5.0% YoY YTD. Looking  forward, industrial profits face  drags on the economy from lower  technology exports, countering  pulls  from stimulus measures. Overall, we still expect profit shrinkage for 2019.”

“With China’s technology manufacturers facing intensifying headwinds from other economies,  the domestic economy needs to grow faster to offset some of these headwinds.  We expect construction of infrastructure projects to speed up, and liquidity easing to match the funding needs from infrastructure projects so that GDP growth can reach  at least  6.0% in 2019.”