“China’s profit slowdown, property turmoil, and soft retail sales weigh on growth outlook, even as trade progress and stimulus hopes support Mainland and Hong Kong stocks.”, — write: www.fxempire.com
Industrial profits rebounded in August and September after falling 1.7% in July, fueling hopes of rising employment and a pickup in domestic consumption. However, October’s pullback in industrial profits suggests the sector remains under pressure.
Industrial Profits and the Demand Landscape Weakening profits could adversely affect the Chinese labor market, including wage growth. Firms could potentially cut staffing levels or reduce wages to manage profit margins. A deteriorating labor market would likely weigh on household spending, adding to the pressures stemming from the housing crisis.
For context, retail sales growth has slowed sharply in the second half of 2025, reflecting weak consumer sentiment. Chinese retail sales slowed from 3.0% year-on-year in September to 2.9% in October, down sharply from May’s 6.4% increase. China reported slower retail sales growth despite Beijing’s efforts to boost household spending through subsidies and other policy measures.
With Chinese shipments bound for the US subject to a 47% levy, margin squeezes could continue. Falling margins may place greater pressure on Beijing to roll out fresh stimulus to bolster the economy.
Corporate Earnings Reflect Demand and Profit Margin Woes Chinese car manufacturer Li Auto released third-quarter earnings on Wednesday, November 26, signaling a deteriorating demand environment.
Profit Margin Squeezes Collide with Renewed Housing Sector Troubles Concerns over demand and profit margins coincided with renewed housing sector stress, another challenge for policymakers.
CN Wire reported:
“Chinese state-backed property developer Vanke saw its bonds plunge over 20% on Wednesday, triggering a trading suspension on five exchange-traded bonds, according to the Shenzhen Stock Exchange. Markets are replaying a pattern from earlier this year, said Yao Yu, founder of Shenzhen-based credit research firm RatingDog. He said markets had priced for Vanke not to be able to meet debt obligations, sparing a steep sell-off before rebounding on signs of state support.”
Yao reportedly highlighted two potential outcomes, stating:
“Now, market rumors suggest Shenzhen has sought help from Beijing, leaving two scenarios – no rescue or central backing.”
Vanke was reportedly China’s largest developer and a bellwether for broader property troubles.
The Hang Seng Mainland Properties Index fell 0.21% on Wednesday, November 26, and by a further 0.48% in early trading on Thursday, November 27. The Index avoided heavier losses, supported by reports of fresh policy measures to bolster the housing market.
Policymakers are reportedly considering mortgage subsidies for first-time buyers, higher income tax rebates for mortgage borrowers, and lower home transaction costs.
Recent economic data and property sector-related news leave China’s economy in a precarious position. Property investment remained the biggest drag on broader fixed asset investment in October, falling 14.7% YoY in the first 10 months of the year.
For context, the property sector accounted for around 25% of China’s GDP in 2023-2024, down from around 30% in the sector’s peak expansion phase during the 2010s.