Chen Changhua: Macroeconomic Insights From Company Earnings (AI Translation)

【周刊提前读】陈昌华：上市公司业绩的宏观启示

China's economic growth has notably decelerated since 2021, and even the 2024 H1 data reveals no signs of a full recovery. Analysis of almost 4,200 Chinese companies listed on A-shares or Hong Kong markets, representative of the broader economy, shows that their biannual revenues have been stagnant at around 40 trillion yuan since the latter half of 2021, reflecting a broader slow-down in the economy itself [para. 1][para. 2].Despite the overall revenue stagnation, the total profit situation also plateaued from 2021 to 2024 H1, maintaining between 2.5 trillion to 3 trillion yuan every six months [para. 3].

In 2024 H1, these companies generated around 38.4 trillion yuan in revenue, a year-on-year decline of 1%. Adjusting for deflation, this indicates persistent economic fragility. The real estate sector reported the most significant revenue decline at 24%, whereas consumer-driven industries like communication services and discretionary consumer goods saw a modest growth of 3% to 4%, aligning closely with retail sales figures [para. 4]. Civil aviation, automotive, and home appliances/textiles subsectors exhibited rapid revenue growth, driven by increased demand for tourism and booming new energy vehicle sales, respectively. Conversely, sectors like steel and building materials experienced declines due to waning investments, particularly a significant drop in real estate investments. Meanwhile, semiconductor revenue fell by nearly 20%, mainly due to a downturn in photovoltaic company performance [para. 5][para. 6].

Profit growth outpaced revenue growth marginally—revenue fell by 1%, but profits improved by 2.5% year-on-year. Sectors like communication services and consumer discretionary goods enjoyed significant profit growth, largely due to higher net profit margins and the strong performance of dominant internet platform companies. Consumer staples, mainly food companies, noted profit boosts due to decreased food raw material prices [para. 7].

Utilities, raw material producers, and sectors like non-ferrous metals and gold saw considerable profit growth attributed to lower coal prices for power generation and rising product prices, respectively. However, the real estate sector faced the most challenges with extensive losses as revenues declined. Real estate-related companies, including those in steel and building materials, saw profits halved [para. 8].

Listed software and semiconductor companies' combined profits dropped to nearly zero mainly due to losses in photovoltaic firms, despite large chip companies recording revenue increases but suffering profit declines due to surging costs [para. 9].

In conclusion, as China's economic growth has decelerated and deflationary pressures have mounted, the revenue and profit of listed companies have largely stagnated, with the real estate and photovoltaic sectors faring badly. Nevertheless, some industries, like food and power, have benefited from lower raw material prices, boosting profits. It is anticipated that the sluggish trend in revenues and profits will persist through the third quarter of 2024. Hopes for a turnaround in the fourth quarter hinge on potential new government policies to stimulate domestic demand in the near term [para. 10].

The content of this analysis is taken from an article intended for publication in the Caixin Weekly on September 23, originally titled "What Do Listed Companies' Performances Indicate About the Macro Economy?" [para. 11].