Staff members work at a workshop of an auto manufacturing enterprise in Qingdao, East China's Shandong Province. Photo: Xinhua

Major Chinese industrial enterprises reported smaller profit declines in June compared with the previous month, showing that the manufacturing sector is improving along with the sustained economic recovery, analysts said.

Interim headwinds and challenges won't alter the long-term growth trend, and there is a great growth potential as China accelerates industrial structural upgrading, the analysts said. 

They called on provinces to roll out detailed supportive measures to aid local manufacturers and inject confidence into enterprises and consumers.

The combined profits of industrial firms with yearly business revenue of at least 20 million yuan ($2.82 million) fell 8.3 percent year-on-year in June to reach 719.76 billion yuan, a significant improvement from the 12.6 percent profits drop seen in May, the National Bureau of Statistics (NBS) said on Thursday.

"With pro-growth policies now taking effect, industrial production will continue to improve, and business profits are expected to rapidly recover," NBS statistician Sun Xiao said in a statement on the bureau's website.

The first-half profits of the companies hit 3.39 trillion yuan, down by 16.8 percent year-on-year. The decline narrowed 2 percentage points from the January-May reading.

In the first six months, among the 41 industrial categories, the profits rose for 12 but fell for 29. Equipment manufacturers saw combined first-half profits rise 3.1 percent, surging by 20.8 percentage points from the first quarter.

"It shows that manufacturing has gained impetus. Thanks to the continuous demand recovery and government policies, industrial enterprises' cost pressure has eased, while robust profit growth in the high-tech, equipment and new-energy sectors serves as a strong driving force," said Zhou Maohua, an economist at China Everbright Bank.

In the second half, industrial profits are expected to recover further as costs keep dropping, Zhou told the Global Times.

China will be able to achieve the yearly GDP growth target of about 5 percent this year as the central government has pledged to ramp up policy support, Tian Yun, a veteran economist based in Beijing, told the Global Times.

"In the second half of the year, nominal economic growth, in incremental terms, may exceed the recovering speed seen in the first half. It will benefit everyone, from enterprises to individuals," Tian said.

There will be more efforts to unleash consumer spending by removing restrictions on consumption of big-ticket items such as homes and cars. Policies that restrict the vitality of the private economy should be promptly removed, Tian noted.

"We should be patient about China's economic recovery as it takes time to overcome the lasting impact of COVID-19 and reconstruct global industrial and supply chains," Wan Zhe, an economist and professor at the Belt and Road School of Beijing Normal University, told the Global Times on Thursday.

The recent convened CPC Central Committee Politburo meeting called for the continuation of a proactive fiscal policy and a prudent monetary policy, and leveraging the role of quantitative and structural monetary tools to support the real economy, technological innovation, and the development of micro-sized, small and medium-sized enterprises.

Due to the impact of the pandemic, developed economies led by the US adopted ultra-loose monetary policies that had widespread spillover effects. However, China's fiscal and monetary policies have remained prudent, Wan said.

"While Monday's meeting sent a positive and encouraging signal to the market, localities should come up with details as early as possible to ensure the implementation of the support policies and spark the vitality of the private economy," Wan said.