Chinese companies saw profit margins of 4.88% in the first six months, trailing the 8.87% recorded by global peers. A Reuters analysis showed weak domestic demand and a strong yuan hurt many firms. While exports grew, the property market downturn and low consumer spending kept overall profits significantly behind global levels.
Nov 6 (Reuters) - Chinese companies' profit margins lag significantly behind those of global peers, a Reuters analysis showed, weighed down by weak domestic consumer demand and the yuan's strength, which has squeezed exporters' margins.
Profit margins at Chinese listed companies stood at 4.88% in the first six months, nearly half the 8.87% recorded by global peers, a Reuters analysis of LSEG data showed. It covered 5,209 Chinese companies and 9,733 elsewhere, each valued at at least $100 million.
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The analysis showed that healthcare technology, tobacco, software, real estate management and development, and IT services recorded losses during the period, resulting in negative margins.
Elsewhere, median profit margins were 11.5% for healthcare technology, 21.0% for tobacco, 10.8% for software, 17.7% for real estate management and development, and 6.8% for IT services.
Although China's economic growth rose to 4.5% in the third quarter from a three-year low, driven by a surge in exports, retail sales — a gauge of domestic consumption — increased only slightly, while the property market remained in a downturn that has significantly eroded household wealth over the past five years.
Factory-gate prices in September rose 5.0% from a year earlier, but industrial input prices climbed 6.9%, official data showed. Prices of consumer goods at the factory gate fell 0.1%, while consumer inflation was 0.9%.
Despite booming exports, Chinese exporters have also been hit by a rally in the yuan since April 2025, during which it has appreciated by about 10.2% against the dollar.
The analysis showed that transportation infrastructure, the leading industry, posted a 20.97% profit margin, notably higher than the 16.5% recorded by its global peers. Marine transport, beverages and utilities also had competitive margins of 13% to 14%.
At the same time, industries favoured by Beijing, such as automobiles and technology hardware, storage and peripherals, had margins of just 2.5% and 3.5%, respectively.
Other priority sectors with relatively higher margins included pharmaceuticals, life sciences tools and services, and semiconductors and semiconductor equipment, at 10.0%, 8.1% and 7.0%, respectively. However, with the exception of life sciences tools and services, these sectors still lagged their global peers.