Experts upbeat on economic outlook
Policy support cited as key for 2024 amid industrial profits recovery trend
China’s economy is showing signs of a steady rebound amid a series of stimulus measures, with profits of the country’s industrial enterprises extending gains for a fifth consecutive month in December as overall manufacturing improved.
Experts said the latest figures send positive signals for a promising economic outlook in 2024, with economic growth of around 5 percent anticipated for this year, given robust policy support, the advancement of industrial transformation and upgrading, and the deepening of reform and opening-up.
Manufacturing and infrastructure investment will play a bigger role in fostering stable economic growth in 2024, and more stimulus measures are needed to boost domestic demand and promote the upgrading and digital transformation of the manufacturing sector, they said.
Data from the National Bureau of Statistics showed on Jan 27 that industrial enterprises with annual revenue of at least 20 million yuan ($2.8 million) saw their total profits increase on average 16.8 percent year-on-year in December, after a 29.5 percent rise in November.
In 2023, profits of industrial enterprises fell 2.3 percent year-on-year to 7.69 trillion yuan, narrowing from the 4.4 percent drop in the first 11 months, the bureau said.
The data points to a continued recovery trend in industrial profits, said NBS statistician Yu Weining, adding that more efforts should be made to consolidate the recovery trend and promote the high-quality development of industry.
Notably, profits at equipment manufacturing enterprises rose by 4.1 percent last year, up from the 2.8 percent rise in the first 11 months, NBS data showed.
Li Chao, chief economist at Zheshang Securities, said: “The equipment manufacturing sector has benefited from the country’s deepening advancement of high-end, intelligent and green manufacturing.”
Li expects industrial profits to register positive growth this year with improved profitability, strong policy support, and producer prices gradually returning to positive territory.
Zhao Bo, a tenured associate professor of economics at Peking University’s National School of Development, said the latest economic indicators point to a continued economic recovery.
He estimated that China’s economy will likely expand by around 5 percent to 5.5 percent, given the diminishing impact of real estate investment.
Despite the better-than-expected 2023 industrial profits results, experts warned that the broader economy is still facing pressures from still-weak domestic demand.
Guo Kai, executive president of CF40 Institute, a research institute affiliated with the financial think tank China Finance 40 Forum, said Chinese industrial enterprises’ profits have contracted for two years in a row — which has rarely happened before — even amid the manufacturing sector’s strong performance in production, sales, and investment.
Guo attributed the pressures faced by manufacturers’ profits to lukewarm consumer demand.
A CF40 report unveiled on Jan 27 said that the Chinese economy still faces an acute challenge of insufficient demand, making it necessary for the government to take on debt of at least 11 trillion yuan this year and promote annual growth in social financing of at least 11 percent to bring inflation and economic growth to a more reasonable range.
Zhang Bin, a senior CF40 researcher and deputy director of the Chinese Academy of Social Sciences’ Institute of World Economics and Politics, said China’s manufacturing upgrade is in solid shape on the back of an open, fully competitive market landscape.
Nevertheless, manufacturing investment may gradually slow, as the country has entered an economic restructuring phase in which total fixed-asset investment will outpace manufacturing investment, Zhang said.
Xu Xianchun, former deputy head of the NBS, said more efforts should be made this year to boost domestic demand and expand investment to keep economic growth within a reasonable range.