China's industrial enterprises saw profits rise for a third straight month in
October, an official survey showed on Monday, adding to a run of indicators
pointing to a stabilizing economy.
Experts said they expect to see more such indicators in the current quarter
and next year as policymakers have announced a series of measures to stabilize
the overall economy, prop up the property sector and boost market
confidence.
They called for a more supportive fiscal policy and strengthened coordination
between monetary and fiscal policies, which will help further bolster the
world's second-largest economy and defuse the risks associated with local
government debt.
Their comments came as data from the National Bureau of Statistics showed on
Monday that industrial enterprises with annual revenue of at least 20 million
yuan ($2.8 million) each saw their total profits increase 2.7 percent
year-on-year in October after a notable 11.9 percent rise in September.
Yu Weining, a statistician at the NBS, attributed the trend of continuous
recovery in industrial profits to the steady rebound in industrial production
and improved corporate profitability with a series of macroeconomic policies
gradually taking effect.
For the January-October period, the profits of major industrial firms fell
7.8 percent year-on-year to 6.12 trillion yuan, narrowing from the 9 percent
drop in the first nine months, the bureau said.
In recent months, the country has pledged a series of measures to bolster the
economy, including the approval of central government bonds worth 1 trillion
yuan, steps to stabilize the property market and policies to boost the private
sector.
Zhou Maohua, an analyst at China Everbright Bank, said that revenues and
profits of industrial enterprises both experienced growth in October, a further
sign that policy support is helping the manufacturing sector recover.
"That is mainly due to the strengthened recovery of demand in the industrial
goods market over the past few months, coupled with a gradual improvement in
industrial product prices and the low comparison base in the previous year," he
said.
Zhou said he believes that industrial profits will continue to improve,
considering the anticipated economic recovery in the coming months, the
improvement in industrial product sales and prices, the strong performance of
the high-tech manufacturing sector and the gradual stabilization of the real
estate sector.
Zheng Houcheng, chief macroeconomist at Yingda Securities, said he expects
the decline in industrial profits to narrow in the first 11 months, but added
that industrial profits may continue to be impacted by rising energy prices.
The latest economic data showed signs of improvement in October, with factory
output and retail sales growth accelerating, while China's foreign trade
registered year-on-year growth.
Meanwhile, China's consumer prices reported negative growth and factory-gate
inflation remained in negative territory in October, indicating that the
recovery in demand is not yet solid, the NBS data showed.
Experts said the broader economy still faces pressure from the housing
correction and sluggish external demand, saying that more policy support is
needed to shore up the economy.
"The key issue going forward is to stabilize the housing market," said Feng
Jianlin, chief economist at Beijing FOST Economic Consulting Co.
On the demand side, he said that policymakers should promptly introduce more
policies supporting people's need for improved housing. On the supply side, the
focus is on improving the financial conditions of real estate enterprises, he
added.
Feng said it is advisable for the country to set an annual growth target of
around 5 percent in 2024, similar to this year, which will help stabilize market
expectations.
He said he expects to see a more supportive fiscal policy in the next few
years. "To better drive economic growth, the focus should be placed on spending
more in fields including education, healthcare, social security, eldercare and
job training. And that spending will also help improve people's livelihoods and
promote consumption."
Ye Yindan, a researcher at the Bank of China Research Institute, said that
fiscal policies should become more proactive and effective, playing a bigger
role in stabilizing growth while expanding demand.
More efforts should also be made to optimize the structure of fiscal spending
and alleviate debt burdens on local governments, she added.
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