Industrial profits up for 3rd month as stimulus moves sustain recovery
Published: Nov 27, 2023 10:02 PM
A complete vehicle production line at a new-energy vehicle factory in Hefei, East China's Anhui Province. Photo: Xinhua

A complete vehicle production line at a new-energy vehicle factory in Hefei, East China's Anhui Province. Photo: Xinhua

Major industrial enterprises' profits rose for a third straight month in October, showing that China's economic recovery efforts, with a mix of forceful stimulus measures, are paying off, experts told the Global Times on Monday. 

From January to October, the profits of industrial companies whose annual main business revenue exceeded 20 million yuan ($2.81 million) fell 7.8 percent, narrowing by 1.2 percentage points from the first three quarters, the National Bureau of Statistics (NBS) said on Monday.

In October alone, the profits of major industrial firms increased 2.7 percent year-on-year.

Since March, the year-on-year profit decline has narrowed, and profits for more than 70 percent of companies in the industrial sector have improved.

The year-on-year fall in the mining sector narrowed by 0.2 percentage points in the January-October period compared with the first three quarters, while that of the manufacturing sector narrowed by 1.6 percentage points. 

Utility companies' profits rose by 40 percent year-on-year in the January-October period, accelerating by 1.3 percentage points, according to the NBS.

Since the start of the year, high-end, intelligent and green manufacturing activities have been further promoted, and the equipment manufacturing segment continued to pick up momentum, Yu Weining, an NBS statistician, said in a statement published on the bureau's official website on Monday.

From January to October, the profits of the equipment manufacturing industry increased by 1.1 percent year-on-year, up 8.9 percentage points compared with the growth rate of the whole industrial sector on average.

The narrowing of industrial profit declines was mainly due to a general improvement in the producer price index (PPI), as the price factor is playing a smaller role in dragging down industrial profits, Wu Chaoming, a deputy head of the Chasing Research Institute, told the Global Times on Monday.

"Thanks to the central government's higher-than-expected rollout of effective counter-cyclical policies as well as companies' smaller replenishment of inventories, industrial production has played a better supporting role for corporate profits," Wu said.

"Although it can be said that the pattern of PPI declines this year remains unchanged, the index bottomed out in June and has been on the rebound since," he noted.

The raw material production sector emerged as the most important driving force for companies' profit gains last month, with a 22.9 percent surge. 

 "With downstream demand continuing to recover, prices are rising for raw materials, a trend that drove the revenue and profit improvements," Yu said.

The consumer goods market continued to warm up in response to policies announced in recent months. In October, the profits of consumer goods manufacturers rose 2.2 percent from a year earlier, up for a third consecutive month.

The 2.7 percent gain of industrial profits in October, however, was far behind that in September, when there was a surge of 11.9 percent.

Zhou Maohua, an economist at China Everbright Bank, told the Global Times on Monday that the growth slowdown from September was mainly due to price declines.

The PPI, which measures costs for goods at the factory gate, fell 2.6 percent year-on-year in October, NBS data showed earlier this month.

 "Industrial companies' performances vary from month to month, but the overall trend is for an improvement amid the continuous recovery of domestic demand," Zhou said.

Zhou said that the improvement in the operating conditions of industrial firms is likely to continue in the next few months, since the domestic economy has returned to its potential level, and there is still much room for a consumption recovery.