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Economy

Surging industrial profits point to recovery

Updated: Aug 28, 2020 By Ouyang Shijia China Daily Print
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NBS data showed 32 out of 41 surveyed industries recorded growth in profits in July, nine more than in June. High-tech manufacturing recorded 36.5 percent growth in profits in July, 27.5 percentage points higher than in June.

Wu said the high-tech manufacturing profit growth was fueled by the government's strong financial support, rising demand for new infrastructure during the year and residents' growing need for consumption upgrading.

"I expect profits in high-tech manufacturing to keep rising in the future, with an accelerated pace in the replacement of old growth drivers with new ones.

"While the rebound in production and sales and the lower costs will help boost profit growth, those factors will also be affected by the slow pace of recovery in consumption," Wu added.

"Mounting global uncertainties may lead to increased capital market volatility, which will then affect business investment. I expect industrial profits will record positive but slower growth in the coming months."

Business activity in China is significantly improving after a steep slump amid the coronavirus outbreak earlier this year, as the country has made considerable progress in containing the pandemic.

Liu Chunsheng, an associate professor at the Beijing-based Central University of Finance and Economics, spoke highly of the Chinese government's effective measures to fight the pandemic, saying that these paved the way for the gradual and steady recovery in the economy.

Citing JP Morgan's recent decision to boost its 2020 China growth forecast to 2.5 percent from 1.3 percent in April, he said China could be the only major economy to see growth this year.

"The recovery in the Chinese economy will definitely give a strong boost to industrial profit growth," Liu said.

"Currently, China is building a new model of development in which domestic economic networks play the primary role, and domestic and international economic networks complement each other. That will also boost demand and help increase profits."

Liu called for increased fiscal and monetary support for consumption and infrastructure investment, saying the government also needs to make a big push to encourage the smooth flow of production factors, build a unified domestic market, create a more business-friendly market, further reduce taxes and fees for enterprises, and deepen reforms and opening-up.

Zhou Maohua, an analyst at China Everbright Bank's financial market department, expected to see a continuous improvement in industrial profits.

"The government's strong support for the real economy and the rising demand from both home and abroad will help boost the profit growth," Zhou said.

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