China's Industrial Costs Exceed 118 Trillion RMB in First 11 Months, Growth Slowing to 1.2% Fails to Mask Profit Stagnation

China Industrial Enterprise Revenue Growth "Freezes" to 1.1% as PPI Deflation and Weak Domestic Demand Deal Heavy Blow to Year-End Performance

According to the latest DataTrack data, the cumulative year-on-year growth rate of operating revenue for industrial enterprises above designated size in China dropped to 1.1% in Jan-Nov 2025, a significant pullback of 0.5 percentage points from the 1.6% in Jan-Oct, continuing the downward trend since the high of 3.4% at the beginning of the year. Considering this is cumulative data, the fact that a single month's change at year-end caused such a large decline implies that revenue in the single month of November faced severe contraction pressure. This is consistent with the sharp correction trend of a 13.1% year-on-year decline in industrial profits for November announced by officials, showing that in a deflationary environment, the dilemma of "increasing revenue without increasing profit" or even "rising volume with falling prices" is intensifying for enterprises. The detailed structure presents a distinct "K-shaped divergence." On one hand, benefiting from export resilience and industrial upgrading, high-tech manufacturing and automotive manufacturing (profit growth of 7.5%) showed relative resistance to the decline, becoming highlights supporting the industrial economy. However, upstream raw material industries are stuck in a quagmire; sectors such as coal mining and oil & gas saw profits and revenues shrink simultaneously due to falling commodity prices. Some sectors even saw profit declines exceeding 40%, seriously dragging down overall data performance. Investigating the cause, the core lies in the severe drag of "price factors." Market data shows that China's PPI (Producer Price Index) has been in deflationary territory for 38 consecutive months, with November PPI falling 2.2% year-on-year. This resulted in nominal revenue failing to keep up despite industrial value added (Output) still growing by 4.8%. Furthermore, analysis points out that the structural correction in the real estate market continues to suppress domestic demand, leading to weak order momentum for construction-related materials (such as steel and cement), further aggravating the erosion of revenue by the deflationary spiral. Looking ahead, revenue growth is likely to hover at low levels in the short term (1-2 months). Although the expected decline in December PPI may narrow slightly, the deflationary pattern is hard to change. Combined with year-end destocking pressure, maintaining full-year revenue growth of 1% faces challenges. In the medium term (3-6 months), the market is focusing on whether fiscal policy in 2026 can exert force. Goldman Sachs forecasts 2026 GDP growth of approximately 4.8%. If officials continue to push "anti-involution" policies and strengthen "trade-in" initiatives for consumer goods, industrial revenue is expected to bottom out and recover in Q1 2026, though the road to recovery will remain bumpy. Online Search References: https://tradingeconomics.com/china/industrial-profits https://www.stats.gov.cn/english/PressRelease/202512/t20251215_1957988.html https://www.goldmansachs.com/intelligence/pages/china-growth-forecast-2026.html