Experts: Industrial output to see gradual recovery

May 29, 2024, 11:58 AM

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China's industrial production faced an 8.5% profit decline in April due to COVID-19 disruptions, but experts anticipate a gradual recovery. With strong government support and pandemic control measures, a notable improvement in output is expected in May. The gap between profits of different industrial sectors highlights the need for targeted support to stabilize growth and supply chains.

Despite weakening economic activity in April amid COVID-19 outbreaks, China is likely to see a gradual recovery in industrial production in the following months with better control of the pandemic and stronger macroeconomic policy support, officials and experts said on Friday.

Profits at China's industrial firms shrank 8.5 percent year-on-year in April amid pressure from resurgent domestic COVID-19 cases and a more complicated and grimmer international environment, the National Bureau of Statistics said on Friday.

For the first four months, industrial firms' profits rose 3.5 percent year-on-year, data from the NBS showed, after an 8.5 percent gain in the first quarter.

Zhu Hong, a senior statistician with the bureau, said that while the April results were severely affected by resurgent domestic COVID-19 cases, the impact of the pandemic will gradually ease.

Considering the government's solid moves to contain the pandemic and its stronger policy support to ease pressures on enterprises, China's industrial profits are likely to recover gradually, Zhu added.

Zhou Maohua, an analyst at China Everbright Bank, explained that China's industrial profits shrank in April as COVID-19 severely disrupted the supply, industrial and logistics chains, and high raw material prices also squeezed margins.

Considering China's strong industrial system, ultra-large domestic market and the government's strong policy support, Zhou said he expects to see a recovery in industrial production and demand upon better control of the pandemic. "(We may) see a notable improvement in industrial output in May."

Yin Yue, an analyst at Shanghai-listed Hongta Securities, said the April industrial profit data showcased the widening gap between the profits at upstream, midstream and downstream firms, saying midstream and downstream manufacturing firms are facing mounting pressures from the COVID-19 outbreaks and high commodity prices.

The NBS data showed profits recorded by mining firms grew by 1.42 times on a yearly basis in April, while profits at manufacturing firms fell by 22.4 percent year-on-year.

Looking ahead, Yin expects the profits at midstream and downstream firms to recover in the following months, as the government is determined to stabilize growth through a number of supportive policies and measures including tax and fee reductions, forceful infrastructure spending and interest rate cuts.

The Ministry of Industry and Information Technology, the nation's top industry regulator, said in a meeting on Friday that it is necessary to implement a package of policies and measures with extraordinary efforts to ensure reasonable growth of the industrial economy in the second quarter, which is a crucial period for the development of the whole year.

Stabilizing the industry and supply chains is the top priority of boosting the industrial economy, and more efforts will be made to help key sectors and enterprises resume work, and to ensure the smooth operation of industry and supply chains, the ministry said.

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