China's economy is maintaining strong momentum as major industrial enterprises posted solid profit growth in the first quarter,pointing to robust economic resilience of the world's second-largest economy despite mounting external uncertainties,officials and experts said on Monday.
The solid profit performance,they said,was most evident in equipment manufacturing and high-tech manufacturing sectors,suggesting that front-loaded macro policy support is feeding through to corporate earnings while China's industrial upgrade continues to gain traction.
However,analysts cautioned that the recovery in industrial profitability may not yet be on firm footing,given the uneven profit improvement across sectors and continued pressure from tighter global energy markets linked to Middle East tensions,highlighting the need for ramping up targeted policy support.
During the first quarter,industrial enterprises with an annual main business revenue of at least 20 million yuan($2.82 million)saw their total profits rise 15.5 percent year-on-year to 1.696 trillion yuan,0.3 percentage point faster than the growth recorded in the January-February period,data from the National Bureau of Statistics showed on Monday.
The robust growth in industrial profits,according to Yu Weining,a statistician with the bureau,was supported by more proactive macroeconomic policies.
"In the first quarter,amid multiple economic headwinds,policymakers stepped up macroeconomic regulation and front-loaded more proactive and effective macroeconomic policies,helping the industrial economy recover steadily,"Yu said.
Emerging growth drivers were a key contributor.Strong gains in equipment manufacturing and high-tech sectors,coupled with double-digit profit growth in the raw materials manufacturing sector,pointed to continued improvement in industrial firms'profitability,Yu said.
According to the NBS,profits in equipment manufacturing industries surged 21 percent year-on-year during the first three months,contributing 6.8 percentage points to the overall profit growth of major industrial firms.Meanwhile,profits in high-tech manufacturing jumped 47.4 percent,contributing 7.9 percentage points to overall industrial profit growth.
Wen Bin,chief economist at China Minsheng Bank,said industrial profits are likely to recover,though the pace of improvement may moderate in the coming months.
Yuan Haixia,dean of the research institute at China Chengxin International Credit Rating,cautioned that stronger-than-expected oil prices fueled by tensions in the Middle East may support profit growth in upstream raw materials sectors,but such gains have yet to be filtered through to downstream manufacturers,whose margins remain under pressure amid relatively weak end-market demand.
Jeremy Zook,lead analyst for China at Fitch Ratings,echoed Yuan's concerns about the potential spillover effects from higher energy prices.
"Although China is relatively insulated from the global energy shock,it is not immune to its effects.If the crisis persists for an extended period,there could be potential spillovers to China's trade and manufacturing sectors,"Zook said.
Yuan noted that the durability of the industrial profit recovery will hinge on stronger domestic demand and smoother transmission along the industrial chain,as domestic demand remains relatively weak,underscoring the need for more targeted policy support to ease pressure on downstream manufacturers and shore up domestic demand.
