Workers assemble tractors in Luoyang, central China's Henan province, on January 2, 2024 (XINHUA)

China's major industrial firms posted increased combined profits for the fourth consecutive month in November, rising by 29.5% year on year, according to data released by the National Bureau of Statistics (NBS) last week. Meanwhile, the NBS also announced that industrial profits reached 6.98 trillion yuan in the first 11 months of the year, down 4.4% year on year, although the rate of decline narrowed by 3.4 percentage points from the first 10 months.

The increase in industrial profits in November may be attributed to two factors: the Christmas consumption boom in Western countries, which leads to a surge in demand and therefore exports, but additionally inflation starting to fall in these countries, combined with China's economy returning to stability amid a challenging 2023. However, there are bright spots worth noting. As the report states, profits at electricity, heat, gas and water production and delivery companies increased by 47.3% year on year from January to November, 7.3 percentage points higher than that of the first 10 months.

When following China's economic indicators, national data on power and electricity consumption is probably the second most important statistic after GDP. These figures reveal the demand and consumption of energy, which tells us how enterprises and individuals are behaving. Thus, power consumption is a vital economic indicator for “reading between the lines” and helps verify other data. As China has developed, it has needed more power. This figure therefore indicates China's economy expanded in 2023.

Despite this, the global economic environment has been challenging for most of the year. Due to the outstanding legacies of the pandemic, as well as the crisis in Ukraine and other geopolitical tensions, confidence in the global economy has been low and many major economies continue to face either limited growth or stagnation. The United Kingdom, as one example, did not grow in the first quarter of the year and has contracted from July to September, with analysts forecasting a mild recession. Similarly, as reported by the Financial Times, the EU is set for only modest growth next year despite wages rising faster than inflation for the first time in three years.

These factors, especially the impact of running inflation in these countries, have significantly damaged consumption and consequently have impacted China's exports and industries throughout the year. While consumption in China has continued to grow overall, the country has several challenges to deal with, even if the overall trend is positive.

While the Western mainstream media enjoys deliberately pushing negativity about China's economy, things are more optimistic than they seem.

China's economy is still growing steadily and the government has multiple policy tools to guide and support it. China's real GDP growth rate in the first three quarters of 2023 reached 5.2% year on year. Sectors such as solar cells, service robots and integrated circuits production increased by 62.8%, 59.1% and 34.5%, respectively, in October 2023. Meanwhile, investments in infrastructure and manufacturing expanded by 5.9% and 6.2% in the first 10 months of the year.

China is currently shifting investment away from real estate and into high-end technologies – which will be integral to driving future development – and is now leading in many strategic technologies, such as new energy vehicles, artificial intelligence and 5G. As investment in the real estate sector falls, credit has been directed to the industrial sector to continue financing industrial production and innovation.

We should understand 2023 as a year of challenges and transition. Meanwhile, China's economy is expected to grow steadily in 2024 as consumption and services recover further and the country's exports continue to become more competitive.

Tom Fowdy is a British political and international relations analyst and a graduate of Durham and Oxford universities.