Iris Pang, the economist for Greater China at ING, notes that falling by 9.9%YoY in October after a 5.3% contraction in the previous month, China's headline industrial profit numbers look scary. 

• "It is the worst year-on-year growth since the data release began in 2011. It hints that manufacturers have been suffering a lot. But the details paint a different picture, some industries are earning big profits.
• Trade-related manufacturers have suffered from the trade war. Not surprisingly, their profits have been heavily squeezed.
• As we expect the trade war will continue even if there is a 'Phase 1' deal, these industries will continue to suffer from shrinking profits.
• The degree of damage depends a lot on whether there will be a tariff rollback. Not only that, such a rollback could alleviate the burden shared by Chinese exporters and manufacturers. US consumers too would share less of the tariff burden and would recover some of the lost consumption demand. 
• This divergence of profitability among different industries will remain until there are big improvements in the trade negotiations. And we will gauge this on the degree of tariff rollbacks.
• If those are significant, for instance taking us back to the situation in May 2019, then exporters should be able to win more export orders and trade-related manufacturing activities will obviously increase. At the same time, the government can slow down the pace of infrastructure investment. 
• That could significantly paint a completely different picture regarding industrial profitiablity. However, it is too early to make such a call. And I'm afraid we remain sceptical about the prospects of any significant progress on tariff rollbacks."