Economy expected to rebound next year

Despite facing headwinds and a harsher external environment, China's economy is set to recover steadily next year, with an anticipated rebound in economic activity and gradual return to normalcy of work and life, according to experts.

They said that while COVID-19 outbreaks may continue to curb factory activity in the short term, the economy will gradually stabilize with the implementation of optimized COVID containment measures and stronger macroeconomic policy support, such as targeted property sector support, relief measures for households and a push for infrastructure spending.

Their comments came as data released on Tuesday by the National Bureau of Statistics showed that the profits of China's major industrial companies contracted at a faster pace between January and November, as renewed COVID-19 outbreaks and shrinking demand weighed on factory activity.

Industrial profits fell 3.6 percent year-on-year in the first 11 months of 2022, according to the NBS, compared with a 3 percent decline in the first 10 months.

Zheng Houcheng, director of the Yingda Securities Research Institute, said the drop in industrial profits is in line with the slowing growth of industrial production and falling producer prices.

China's industrial output grew 2.2 percent year-on-year in November after a 5 percent rise in October. Meanwhile, the producer price index, a gauge of industrial profitability, stayed in negative territory for the second month in a row in November, rekindling worries about slowing demand and weak activity.

Despite the overall fall of industrial profits, "Tuesday's (detailed) data showed that the business profit structure of industrial firms continues to optimize, as profits earned by some midstream and downstream industrial enterprises post an uptick in profit margins with the help of government measures to ensure stable prices and supplies, reduce taxes and fees, and increase financial support," said Zhou Maohua, a macroeconomic analyst at China Everbright Bank.

Profits in the equipment manufacturing industry jumped 3.3 percent year-on-year between January and November, which was 0.1 percentage point higher than the figure for the first 10 months, according to the NBS.

Looking ahead, Zhou expected to see a gradual improvement in industrial profits next year.

Louise Loo, senior economist at British think tank Oxford Economics, said that while a surge in COVID cases and uncertainties point to a weaker outlook in the first quarter of next year, the economy will gradually recover and stabilize with macro policy easing.

Amid a slew of measures focused on supporting the real estate sector, recent high-level talk "suggests that fiscal policy will take a front seat in stimulating domestic consumption next year, while authorities keep monetary conditions loose", Loo added.

The NBS said on Tuesday that China has updated its 2021 GDP growth to 8.4 percent from the 8.1 percent released in January, raising the comparison base for China's GDP expansion this year.

Despite expected growth pressures and external challenges, global executives remain optimistic about China's economic vitality.

Jeffery Liu, vice-president of US material science giant Corning Inc, said that China has always been a strategic market for the company.

ouyangshijia@chinadaily.com.cn