China's Industrial Profits Return to Growth as Conditions Stabilise

• China's industrial firms posted higher profits in the opening months of the year, official data showed on Wednesday, reinforcing signs that an economic recovery was gaining traction, despite persistent sluggishness in the property sector.

• Profits at China's industrial firms jumped 10.2% in the first two months from a year earlier, National Bureau of Statistics (NBS) data showed, following a 2.3% profit decline for the whole of 2023.

• The surge comes on the heels of upbeat indicators earlier this month that suggest a stabilisation in Asia's largest economy. 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," said Lynn Song, chief economist for Greater China at ING. "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."

• State-owned firms recorded a 0.5% rise in earnings in January-February, foreign firms saw a 31.2% 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, fluctuations in energy and other commodities prices and supply chain disruptions from geopolitical conflicts.

(Source: Reuters)