00:00Well, let's talk now to Mark Oswald, who's Chief Economist and Global Strategist at ADM Investor Services International.
00:06Good to see you, Mark, as always. Welcome back.
00:08So, industrial profits dropping 5.5% from a year earlier in October, the biggest decline that's been seen since June.
00:16How much have trade tensions with the U.S. been a factor in this?
00:21That's certainly playing a role without any shadow of a doubt.
00:25Well, I've seen it particularly as a lot of smaller manufacturers who export household goods, furniture, those sort of things, toys to the U.S.A.
00:37I think it's also the lack of domestic demand, which is also pressuring it, and the so-called processes of involution,
00:45which the authorities are now basically trying to counter.
00:50And the fundamental problem, obviously, is with profits shrinking above all in the older manufacturing sectors.
01:00It does put pressure on investment, as we've seen in the fixed asset investment numbers, and indeed on employment.
01:07We did see some sectors doing very well, didn't we?
01:10Profits overall at major industrial firms growing at 1.9% in the first 10 months.
01:15What message do these numbers send about where China's next phase of growth will be?
01:22Well, it's certainly going to be in things like anything to do with transport, so shipping, air or rail.
01:30It's also going to be in the auto sector.
01:35So that is becoming more and more subject to price cutting, which hopefully the involution measures, which have been implemented, will counter.
01:45The question now is the bigger challenges, in contrast to 2015, when there were measures basically to boost the manufacturing sector and also to counter overcapacity,
01:58is there's already quite a lot of overcapacity in the high-tech and other similar sectors, which needs to be balanced out.
02:09Yes, there will be growing demand, but at the current stage, particularly with trade tensions with the United States, extra capacity is definitely not needed.
02:21So China's already just made an announcement of an action plan to boost domestic demand.
02:27How can policymakers further support this and also reinvigorate the industrial sector?
02:31I think, you know, improving domestic demand is definitely a key part of it.
02:40The key issue there, though, is the weakness in consumer demand.
02:46You're seeing it also in loan data, consumer loan data, basically weakening at the moment due to a certain lack of confidence.
02:57So it's a tricky phase now because we are in an uncertain world.
03:05There is clearly a big push to promote trade with both Africa and with Asia, and that will definitely help the manufacturing sector without a shadow of a doubt.
03:19But what would be really good is basically to counter the problems in the property sector.
03:25Those really need to now to be ring-fenced so they are not such an enormous drag on GDP as they have been for the past three to four years.
03:36Mark, thank you so much for your expertise.
03:38As always, that's Mark Oswald from ADM Investor Services International.
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