"Sluggish Domestic Demand and Overproduction: One-Fourth of Chinese Companies Post Losses This Year"

Half of Real Estate and Solar Companies in the Red

Chinese companies are experiencing deteriorating performance due to sluggish domestic demand and overproduction. Approximately one-fourth of Chinese listed companies recorded losses from January to September this year.

On November 28, Nikkei reported this after analyzing the financial results of 5,300 companies (excluding financial firms) listed on mainland Chinese stock exchanges such as Shanghai and Shenzhen.

AFP Yonhap News

The proportion of companies that posted losses reached 24%, up 1 percentage point from the same period last year, marking the highest level since data became available in 2002. The loss-making company ratio hit a low of 7% in 2017 and has been on the rise since then.

The combined net profit of the 5,300 companies increased by only 2% compared to the same period last year.

In particular, about half of real estate and solar-related companies recorded losses. Out of 100 listed real estate companies, 48 posted net losses from January to September. The combined performance of these 100 companies during this period amounted to a net loss of 64.7 billion yuan. Vanke, a real estate developer, recorded a loss of 28 billion yuan from January to September, the largest among Chinese listed companies. According to the National Bureau of Statistics of China, the floor space of new home sales during this period decreased by 6% year-on-year.

Nikkei pointed out that the deteriorating performance of real estate companies has significantly affected related industries, with more than 30% of construction companies also posting net losses.

In some sectors, supply has exceeded demand, leading to price competition and putting pressure on profitability. The solar industry is a representative example, with major companies such as Jinko Solar posting consecutive losses.

In the automotive sector, 6 out of 21 manufacturers recorded losses, and the combined net profit declined by 10%. State-owned Guangzhou Automobile Group (GAC) posted a loss of 4.3 billion yuan, while BYD’s net profit fell by 8% year-on-year.

China’s cumulative new car sales from January to September reached 24.36 million units, up 13% year-on-year. Although the market continued to expand due to government subsidies, there was a notable decline in prices, especially in the new energy vehicle segment, including electric vehicles.

The wealth effect from the real estate market downturn (where declining asset values lead to reduced consumption and investment) has weakened consumer sentiment. The net profits of commercial and retail companies and food companies dropped by 35% and 5%, respectively, compared to the same period last year.

During the same period, only a few sectors, such as semiconductors?which the Chinese government is fostering as strategic industries?showed strong performance. The Chinese government is actively supporting the semiconductor industry, not only through subsidies and tax breaks but also by encouraging the domestic use of semiconductors for artificial intelligence (AI) applications. Multiple fields, including contract manufacturing, design and development, and manufacturing equipment, showed growth from January to September, with net profit increasing by 50% year-on-year.

Nikkei assessed that both the central and local governments in China are facing increased debt, making it difficult to implement large-scale spending to boost domestic demand. The report also predicted that, due to concerns over escalating U.S.-China tensions, policies to strengthen supply chains for semiconductors and other industries will likely take precedence over measures to stimulate consumption.

This content was produced with the assistance of AI translation services.