Industrial companies in China posted higher profits in the opening two months of the year, according to official data released on Wednesday.
Profits jumped by slightly over 10%, data from the National Bureau of Statistics (NBS) data showed – a significant turnaround given the 2.3% profit decline in 2023.
The statistics suggest an economic recovery may be gaining traction despite persistent sluggishness in the property sector.
ALSO SEE: China Launches WTO Complaint Against US Over EV Subsidies
The surge comes on the heels of upbeat indicators earlier this month that suggest a stabilisation in Asia’s largest economy. But overall gains remain tempered by the persistent fragility in China’s property market, pointing to a divergence in the country’s post-pandemic recovery.
“After an upside surprise to industrial production to start the year, a further recovery of industrial profits sends another signal that we are indeed seeing a gradual recovery after a bottoming out last year,” chief economist for Greater China at ING Lynn Song said.
“If the recovery of manufacturing continues, it would contribute toward reaching the 2024 growth target, but more supportive policies are still needed to sustain the momentum and recovery.”
Foreign and private firms saw best gains
State-owned firms recorded a 0.5% rise in earnings in January-February, foreign firms saw a 31% gain while private-sector companies booked a 12.7% increase, the data showed.
Zhou Maohua, an analyst at China Everbright Bank, expects continued gains in industrial earnings, but said their prospects could be dented by an uncertain global demand outlook, price fluctuations in energy and other commodities and supply chain disruptions from geopolitical conflicts.
A broad-based rebound in China’s domestic demand also remains to be seen.
Earlier in March, Chinese electric vehicle battery giant CATL posted its first drop in quarterly earnings since the second quarter of 2022.
In the face of lingering economic weakness, a deputy central bank chief last week assured markets of policy options at its disposal, including cuts in banks’ reserve requirement ratios (RRR).
The central bank announced the biggest RRR reduction in two years in January.
China’s statistics bureau publishes combined data for the first two months to sort out distortions due to the varied timing of the Lunar New Year.
Industrial profit numbers cover firms with annual revenues of at least 20 million yuan ($2.78 million) from their main operations.
- Reuters with additional editing by Jim Pollard
ALSO SEE:
China Told it Must ‘Reinvent Itself’ to Turn Economy Around
China Told Only Major Intervention Can Turn Economy Around
Foreign Investment in China Slumps 20% in January-February
Chinese Industry Extends Turnaround as Profits Rise Again
China’s Factory Activity Expanded in September, Survey Finds
China’s Industrial and Services Activity Slips Further in June
