Editor's note: Shen Jianguang, a special commentator on current affairs for CGTN, is chief economist of JD.com. The article reflects the author's opinions and not necessarily the views of CGTN.

The Politburo meeting held on July 30 decided to "research and formulate China's 15th Five-Year Plan for National Economic and Social Development." China's economy is now at a critical juncture of transformation and upgrading, and some sectors have seen temporary profit swings — both a normal adjustment in today's complex global environment and an inevitable phase in industrial optimization.

Weighed down by insufficient effective demand, falling industrial goods prices and overdue payments, profits of middle and large industrial enterprises fell 9.1 percent year-on-year in May — the lowest level since November of last year, pushing aggregate profits back into the negative territory over the first five months. In fact, total profits in the January-May period reached 2.7 trillion yuan, slightly below the 2.8 trillion yuan recorded in the same period last year. This suggests that profits dropped by 1.1 percent year-on-year in the January–May period and, even after stripping out short-term items such as investment income, rose by only 0.6 percent.

However, a deeper analysis shows that the foundations of China's high-quality development remain solid and that the innovation-driven momentum is growing stronger.

Demand-side: Steady consumption growth

From January to May, total retail sales of consumer goods rose 5.0 percent year-on-year, driven especially by upgraded product categories. The national trade-in program delivered significant results too, fueling double-digit sales growth in home appliances and communications equipment. As household incomes rise and the consumption environment improves, domestic demand is steadily unlocking its potential. In foreign trade, resilience remains strong: Exports grew by 6.3 percent year-on-year in May, with robust gains in emerging markets.

Supply-side: New engines gain strength

High-tech manufacturing investment maintained double-digit growth, and strategic emerging industries — such as new-energy vehicles and photovoltaic equipment — are booming. From January to May, profits in the equipment manufacturing sector rose 8.1 percent year-on-year, well above the overall average and signaling a shift toward mid-to-high-end industry. Notably, in May alone, value added in high-tech manufacturing increased 8.6 percent year-on-year while manufacturing of digital products grew 9.1 percent, both outpacing the overall industrial growth rate.

Targeted policy recommendations

Policy measures could be adopted to help enterprises overcome these temporary challenges. Four key recommendations are as follows:

1. Unleash consumption potential and cultivate new growth engines

Further expand the trade-in policy to include more high-quality products. Introduce complementary measures to boost service consumption and to meet diverse household needs. Continue optimizing the consumption environment to enhance the convenience of consumption and user experience. Consider introducing a national childbirth subsidy and enacting measures to reduce home-buying costs and mortgage rates, injecting fresh momentum into consumption.

2. Strengthen fiscal support and improve business environment

Leverage local special-purpose government bonds to prioritize the clearance of government arrears to businesses. Establish a durable, long-term mechanism to ensure timely payments and safeguard enterprises' legitimate rights. Fully implement tax and fee reductions to lighten corporate burdens. Allocate additional bond quotas specifically for arrears clearance — or employ debt-swap arrangements — to expedite payments and foster a fair, orderly market.

3. Guide healthy industrial development and foster fair competition

Enhance industry self-regulation to establish more scientific pricing mechanisms. Encourage enterprises to boost R&D spending and upgrade technology to strengthen core competitiveness. Improve industrial-chain collaboration so that large, medium, and small enterprises can develop in synergy. Utilize the new“SME Payment Protection Regulations”and revisions to the Anti-Unfair Competition Law to reinforce market order and shift enterprise focus toward quality improvement and value creation.

4. Refine institutional frameworks and optimize market competition

At the national level, further improve relevant laws, regulations, and industry standards to curb irrational competition. Guide leading enterprises to set reasonable supply-chain payment terms and fulfill social responsibilities. Encourage firms to reorient toward technology innovation, brand building, and service upgrades — transitioning from scale-driven to quality-and-efficiency-driven growth.

China's long-term growth fundamentals remain intact: Its super-large market continues to confer advantages, and its industrial system is becoming increasingly sophisticated. As pro-growth policies take effect, corporate profitability should gradually recover. By maintaining strategic resolve and confidence — and through collective efforts of government, businesses, and society — China can leverage opportunities to achieve both qualitative improvements and sustainable quantitative expansion.