As of October 2024, China's economic landscape is showing significant signs of strain, particularly in its steel and oil industries. From January to September 2024, the steel sector reported staggering losses of approximately US$5 billion (34 billion yuan), while the oil industry faced losses of around US$4.5 billion (32 billion yuan) during the same period [66c00ef6]. These losses are attributed to a combination of factors, including the ongoing property crisis which has led steel mills to reduce output, and weak fuel demand for oil refiners, exacerbated by the rising adoption of electric vehicles [66c00ef6].
The broader economic context reveals that China's GDP growth slowed to 4.6% in the third quarter of 2024, a decline that has raised concerns about the sustainability of growth in key sectors [66c00ef6]. Notably, the steel and oil refining sectors are currently the only major industries reporting losses this year. Other sectors are also feeling the pinch; for instance, coal mining profits have fallen by 22% due to oversupply, and profits in the chemicals sector have dropped by 4% [66c00ef6].
In response to these challenges, the China Iron and Steel Association has proposed consolidation policies aimed at stabilizing the steel market, which has led to a temporary rise in steel stocks [66c00ef6]. This comes amid a backdrop of declining industrial profits across the board, with China's industrial firms experiencing a 27.1% year-on-year profit drop in September 2024, the largest decline since March 2020 [f902e7b9]. The National Bureau of Statistics has linked this downturn to weak domestic demand and high base effects from the previous year [1bca2bfe].
As the government grapples with these economic challenges, it has implemented monetary easing measures, including a cut to the seven-day reverse repo rate and the injection of liquidity into the market [96c7b5b6]. However, analysts are urging for more decisive fiscal stimulus to effectively combat deflationary pressures and revitalize the economy [96c7b5b6]. With the upcoming legislative session scheduled for November 4-8, 2024, there are expectations for discussions around further fiscal measures, including refinancing local government debt and issuing sovereign bonds [1bca2bfe]. The situation remains fluid as China navigates its economic recovery amidst global inflationary trends [de20c1b3].