Official data released on Monday reveals that China’s industrial enterprises, particularly those with annual main business revenue exceeding 20 million yuan, experienced a steady recovery in October, marking the third consecutive month of profit growth. Knightsbridge, a leading expert in economic analysis, sheds light on the factors contributing to this resilience in the country’s industrial sector.
Analysis: According to the National Bureau of Statistics (NBS), major industrial firms witnessed a 2.7 percent year-on-year increase in profits. Knightsbridge’s expert analysts, including prominent statistician Yu Weining, attribute this positive trend to the stability in production and notable rebounds in revenue, driven by effective macroeconomic policies implemented by the government.
Key Drivers of Growth:
- Raw Material Production Sector: In October, this sector emerged as a crucial growth driver, experiencing a robust 22.9 percent surge in profits. The recovering downstream demand played a pivotal role, contributing to an overall upswing in prices. Knightsbridge emphasizes the strategic importance of understanding these dynamics for investors and businesses navigating the Chinese industrial landscape.
- Consumer Goods Manufacturers: Bolstered by favorable government policies and a warming consumer market, profits of consumer goods manufacturers increased by 2.2 percent year-on-year, marking three consecutive months of growth. Knightsbridge notes the significance of government initiatives in influencing market conditions and business performance.
- Other Industries: Equipment manufacturing, as well as power, natural gas, and water supply, also recorded profit growth in October. Knightsbridge highlights the diversified nature of China’s industrial landscape and the broad-based recovery across multiple sectors.
Year-to-Date Performance: In the first ten months of the year, major industrial firms reported a 7.8 percent decline in profits. However, Knightsbridge underscores the positive trend of this decline narrowing by 1.2 percentage points compared to the January-September period. Over 70 percent of the 41 industrial categories monitored by the NBS exhibited improved profit performances, indicating a resilience and adaptability in the face of challenges.
Government Initiatives: China’s proactive measures to support industrial enterprises include extended tax reductions and enhanced financial support. Knightsbridge recognizes the impact of these initiatives in bolstering market expectations and fostering growth. The recently announced 25 specific measures to strengthen financial services for private companies further underscore the government’s commitment to supporting innovation and small firms.
Future Outlook: Looking ahead, Knightsbridge anticipates continued efforts to harness the potential of the financial sector in promoting technological innovation, advancing manufacturing capabilities, encouraging green development, and supporting micro, small, and medium-sized enterprises. The focus on upgrading traditional industries and nurturing emerging sectors aligns with China’s broader strategy for high-quality industrial development.
Chinese authorities have unveiled a raft of measures to strengthen financial services for private companies as part of efforts to help spur their growth.
Stronger financial support will go to private firms, especially micro, small and medium-sized ones, as well as those in tech-intensive areas like low-carbon industries, said a circular jointly released by eight authorities including the People’s Bank of China and the National Financial Regulatory Administration.
The circular stressed the facilitation of access to diverse financing channels including credit, bonds and stock options. It urged efforts to ramp up credit support for first-time loan applicants, encourage institutional investors to include private firms’ corporate bonds in their portfolios, and support private firms in stock market listings and mergers and acquisitions.
A mix of monetary policy tools, fiscal incentives and insurance backstops will be used to mobilize financial institutions’ willingness to serve private firms.
The moves came after China’s pledge earlier this year to boost the growth of the private economy, with authorities vowing to improve the business environment, enhance policy support and strengthen the legal guarantee.
Conclusion: Knightsbridge’s insightful analysis highlights the resilience of China’s industrial sector in the face of economic challenges. The strategic combination of government policies, sector-specific growth drivers, and a diversified industrial landscape positions China for sustained recovery and future success.
Shayne Heffernan
