Growth shows stable recovery of economy

Policies expected to ease pressure on small midstream, downstream firms

Profits at China's major industrial companies maintained steady growth in August, showcasing the resilience of high-tech manufacturing and indicating the nation's stable economic recovery despite rising downside pressures, officials and experts said on Tuesday.

According to the National Bureau of Statistics, profits at China's large industrial firms rose 10.1 percent year-on-year in August, compared with a 16.4 percent gain in July.

Amid rising commodity prices and sporadic COVID-19 cases, more well-targeted policies are expected to ease the pressure on small midstream and downstream firms, experts added.

For the January-August period, major industrial firms' profits went up 49.5 percent to 5.61 trillion yuan ($869.6 billion), and the average January-August growth rate for 2020 and 2021 stood at 19.5 percent, according to the NBS.

Zhu Hong, a senior NBS statistician, said the profit of high-tech manufacturing continues to grow rapidly. In August, it expanded by 17.5 percent year-on-year, 7.4 percentage points higher than the average growth rate of major industrial enterprises' profits.

Among these, the profits of the aerospace vehicle industry and electronic chemicals manufacturing respectively increased by 1.77 times and 86.8 percent in August. Their growth in August was significantly higher than that in July, Zhu added.

"Despite sporadic COVID-19 cases, recent flooding and a high comparison base, the profits of major industrial enterprises continued to grow steadily in August, with their business conditions improving," Zhu said.

But the statistician also highlighted that the rising commodity prices, high international logistics costs, and chip shortages are still pushing up corporate costs, which presents challenges to profits.

CITIC Securities said in a research note that, "The consumer goods manufacturing industry has also become one of the driving forces for the overall profitability of industrial enterprises, as its profits grew 14.4 percent year-on-year in August."

That is a combined result of a recovery in consumers' demand, and the rising prices of products, CITIC Securities added.

Wu Chaoming, chief economist at Chasing Securities, said as commodity prices continue rising, profits have become more concentrated in upstream sectors, such as the mining industry and the raw material manufacturing industry.

Experts said the growth of industrial profits is likely to be affected by the sporadic COVID-19 cases, as well as rising commodity prices, which pressured the profitability of small and micro business in the midstream and downstream sectors.

Zhou Maohua, an analyst at China Everbright Bank, said, "More efforts should be made to ease the rising commodity prices and work with other countries to fight the COVID-19 pandemic to maintain the stability of global industrial and supply chains."