BEIJING (Reuters) -Profits at China’s industrial firms extended gains for a third month in October, adding to signs of a stabilising economy following a run of mostly upbeat data suggesting Beijing’s support measures have helped bolster a tentative comeback.
The 2.7% year-on-year rise came on the back of an 11.9% gain in September and a surprise 17.2% increase in August, and follows stronger-than-expected industrial and consumption activity over October.
For the first 10 months of 2023, profits slid 7.8% from a year earlier, narrowing from a 9% decline in the first nine months, data from the National Bureau of Statistics (NBS) showed on Monday.
The world’s second-largest economy has struggled to mount a strong post-COVID recovery as distress in the housing market, local government debt risks, slow global growth and geopolitical tensions dented momentum.
A flurry of policy support measures has had only modest effect, raising pressure on authorities to roll out more stimulus.
“Three consecutive months of positive profit growth suggest that the worst times, when profitability was squeezed by high input costs, overcapacity and soft demand, are over,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
“However, the volatility of profits is a sign enterprises remain highly sensitive to input costs,” he added. “The sharp slowdown of year-on-year profit growth was partly driven by a rebound in energy prices.”
LONGi Green Energy Technology Co, a major domestic solar energy manufacturer, saw its third quarter net profit plummet 44.1% to 2.5 billion yuan ($346.7 million), hit by macroeconomic headwinds and a supply glut.
China’s industrial output grew 4.6% in October, compared with the same period a year earlier, although analysts say a full-blown recovery remains some time away, even if the economy did grow faster-than-expected in the third quarter.
“Transforming the economic growth mode is more important than pursuing a high growth rate,” China’s central bank governor said in a speech this month, suggesting an urgent need for longer-term structural reforms as investment-led growth loses steam.
State-owned firms posted a 9.9% decline in earnings in the first 10 months, foreign firms recorded a 10.2% slide and private-sector companies saw profits down 1.9%, according to a breakdown of the NBS data.
Industrial profits data covers firms with annual revenues of at least 20 million yuan ($2.74 million) from their main operations.
($1 = 7.2922 Chinese yuan)
(Reporting by Joe Cash, Liz Lee and Qiaoyi Li. Editing by Sam Holmes)
