Key industrial companies report a narrowed profit decline in October

An employee works on the production line of a cog wheel manufacturer in Huaian, Jiangsu province. (ZHAO QIRUI/FOR CHINA DAILY)

China's major industrial firms witnessed a narrowed profit decline in October amid favorable macroeconomic policies aimed at boosting domestic demand, signaling a positive shift in the overall performance of the industrial sector, experts said on Wednesday.

They said the recovery is not yet solid as sluggish global demand and depressed industrial product prices weigh on revenue growth and intensify cost pressures, and called for further macroeconomic policy support to expand consumption and stabilize the property sector.

Industrial enterprises with annual revenue of at least 20 million yuan ($2.76 million) saw their total October profits slump 10 percent from a year earlier, data from the National Bureau of Statistics showed on Wednesday, compared to a 27.1 percent year-on-year decline for the month before.

For the January-October period, China's industrial profits dipped 4.3 percent year-on-year to 5.87 trillion yuan, following a 3.5 percent decrease in the first nine months, the NBS said.

Yu Weining, an NBS statistician, said the profit slump narrowed in October with a package of stimulus policy measures taking effect gradually, indicating a steady recovery in corporate earnings, especially for manufacturers — a subcategory within industrial firms — whose profit decline narrowed by 22.3 percentage points from September.

Moving forward, Yu said the country needs to take more steps to better implement the stimulus policy measures and consolidate the economic recovery trend.

"The improvement in industrial profits is primarily driven by the recovery in the manufacturing sector, reflecting the positive impact of domestic macroeconomic policies aimed at boosting consumption and investment," said Zhou Maohua, a researcher at China Everbright Bank.

Zhou highlighted that industries such as consumer goods and equipment manufacturing saw an improvement in profits, while high-tech manufacturing maintained strong profit levels.

During the first 10 months, profits at equipment manufacturing companies and high-tech manufacturing enterprises surged 4.5 percent and 12.9 percent year-on-year, respectively, NBS data showed.

Meanwhile, Zhou warned that the industrial sector is still facing challenges from sluggish global demand recovery, depressed industrial product prices, rising production costs and competitive pressure within industries. Furthermore, the recovery within the industrial sector remains uneven, with some industries still in the early stages of stabilization, he added.

Looking ahead, Zhou believes there remains ample space for further macroeconomic policy support.

"Consumption and investment will likely further pick up with the government's intensified efforts to drive large-scale equipment upgrades and trade-in deals for consumer goods. Meanwhile, measures to spur consumption, stabilize the housing market and boost infrastructure investment are expected to accelerate the recovery of consumption and investment. These policies are likely to foster a virtuous cycle between market demand and industrial supply."

Wang Tao, head of Asia economics and chief China economist at UBS Investment Bank, said that she believes additional policy support will come in the months ahead, with recent policy dynamics "signaling a very strong turning of overall government policy in trying to stabilize domestic demand and boost confidence".