Rebound in industrial profits signals stabilization of economy

China's economy is showing signs of stabilizing amid robust policy measures and notable industrial recovery, analysts said on Sunday.

They expect the recovery momentum to extend into the fourth quarter, keeping the country on course to meet its annual growth target of around 5 percent, with authorities likely to ramp up fiscal and monetary measures to counter persistent headwinds of still-weak demand and external uncertainties.

Policy options on the table include issuing ultra-long-term special treasury bonds, faster issuance of local government special bonds, and potential monetary easing to lower financing costs and channel credit into technology and green sectors, they added.

Their comments came as data from the National Bureau of Statistics showed that in August, profits at major industrial enterprises jumped 20.4 percent from a year earlier. This followed a 1.5 percent fall in July.

China's industrial enterprises with an annual revenue of at least 20 million yuan ($2.8 million) saw their total profits increase 0.9 percent year-on-year to 4.69 trillion yuan in the first eight months of 2025, following a 1.7 percent decline in the first seven months.

Kinger Lau, chief China equity strategist at Goldman Sachs, said policy efforts to address excessive competition in key sectors and rebalance demand and supply — also known as the initiative to curb rat-race competition — benefit the profitability of leading enterprises. If such efforts continue, a roughly 2 percentage point boost can be expected in the earnings growth of Chinese listed companies in the next couple of years.

Huang Yiping, dean of Peking University's National School of Development, said he expects China's economy to remain steady, though structural challenges continue to weigh on the outlook.

Citing official data, he noted that China has managed to maintain an average growth rate of 5.5 percent in the first four years during the 14th Five-Year Plan period (2021-25) — a strong rate by global standards.

According to the NBS data, China's per capita disposable income reached 41,314 yuan in 2024, an increase of 9,125 yuan from 2020.After adjusting for inflation, it grew at an average annual rate of 5.5 percent between 2021 and 2024, in line with GDP growth during the same period.

Huang warned that the country has entered a new stage where downward pressures have persisted for some time, and more efforts were needed to drive industrial upgrading and boost consumption.

"What we need is a combination of fiscal and monetary measures with industrial and reform policies," he said.

A new report released by Peking University's National School of Development said that given the mounting downward pressures on the economy, short-term macroeconomic measures could play a vital role in stabilizing growth.

It recommended shifting fiscal spending from production-focused investment to livelihood priorities such as education, healthcare and elderly care, which could both stimulate consumption in the short term and improve resource allocation efficiency in the long run.

Noting that the Chinese economy is displaying steady performance with positive progress while acknowledging that domestic demand and price levels remain weak, the People's Bank of China, the country's central bank, said it will strengthen countercyclical adjustments and put in place a moderately loose monetary policy.

Efforts will be taken to ensure the effective implementation of various monetary policies to fully unleash their effect, promote decline in comprehensive financing costs and ramp up support for scientific and technological innovation, consumption, small and micro enterprises and foreign trade, the central bank said on Friday following its third-quarter monetary policy meeting.

Bai Wenxi, vice-chairman of the China Enterprise Capital Union, said the country's around 5 percent annual growth target remains achievable this year with intensified policy support and accelerated push for deepening structural reforms.

He said that policymakers are likely to roll out a wave of new measures to stabilize growth in the fourth quarter.

"On the monetary side, there is still room for cuts to the reserve requirement ratio, along with targeted support for innovation and green sectors," Bai noted. "Fiscal initiatives could include issuing ultralong-term special treasury bonds to expand affordable housing and urban renovation projects, and offering subsidies for trade-in deals for consumer goods."

Additional measures may involve issuing consumer vouchers, wage subsidies and accelerating reforms to pensions, fiscal systems and income distribution, as Beijing works to boost confidence and unlock long-term growth potential, he added.

Zhang Chenxu contributed to the story.

Contact the writers at ouyangshijia@chinadaily.com.cn