BEIJING (Reuters) – Chinese industrial corporate profits continued to fall in double digits during the first eight months, but the pace of decline eased slightly as a series of policy support steps began to stabilize parts of the faltering economy.
The 11.7% year-on-year decline in earnings narrowed from a 15.5% contraction in the first seven months, in line with expectations and perhaps indicating a modest recovery is starting to take root for some companies.
This was supported by August profits, which registered a surprise rise of 17.2% from a year earlier, data from the National Bureau of Statistics showed on Wednesday. Profits fell 6.7% in July.
“These data reflect that domestic demand has stabilized and the supply and demand sides have seen a balanced recovery,” said Bruce Pang, chief economist at Jones Lang LaSalle.
“A series of policies to promote macroeconomic recovery” boosted last month’s earnings, Yu Wenying, a statistician at the National Bureau of Statistics, said in an accompanying statement.
Profits of 30 out of 41 major industrial sectors improved during this period, with losses in the raw material manufacturing industry shrinking significantly due to rising commodity prices and a recovery in demand. 28 out of 41 industries saw their profits decline from January to July.
As Beijing steps up political support for its faltering economy after a brief post-Covid-19 rebound, recent data showed signs of stabilization with stronger than expected bank lending, industrial production and retail sales growth in August.
However, persistent weakness in the crisis-hit real estate sector, which accounts for a quarter of the world’s second-largest economy, remains a drag on growth.
Last month, new home prices in China fell at the fastest pace in 10 months. Easy borrowing rules are showing signs of providing a boost to some major cities such as Beijing in new home sales, but concerns remain that the improvement may be short-lived.
The concern is that lower confidence in the real estate sector could undermine the overall demand outlook for businesses and the economy.
A breakdown of ONS data suggests there is still a long way to go to achieve a strong rebound in overall earnings growth.
The data showed that the profits of state-owned companies fell by 16.5% in the first eight months, and fell by 11.1% for foreign companies, while private sector companies saw their profits shrink by 4.6%.
The industrial profit figures cover companies with annual revenues of at least 20 million yuan ($2.75 million) from their main operations.
(This story has been corrected to fix lower profits for state-owned enterprises, foreign companies and the private sector in paragraph 12)
(Reporting by Qiaoyi Li, Ryan Wu and newsroom in Beijing – Prepared by Muhammad for the Arabic Bulletin) Editing by Shri Navaratnam
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