PROFITS at China's industrial companies declined at a slower pace in the first seven months of this year in a sign that the world's third-largest economy is beginning to recover.

Domestic manufacturers in 22 provinces chalked up a total net profit of 1.11 trillion yuan (US$161 billion) from January to July -- a drop of 17.3 percent from a year earlier. But the decline was slower compared with a 21.2 percent tumble in the first half of this year, the National Bureau of Statistics said yesterday.

Accounts receivable rose 9.5 percent to 3.37 trillion yuan in the period, 0.5 percentage point higher than the first-half's rise.

"The faster growth of accounts receivable showed stronger confidence by the companies in vendors, which reflected their optimism over a future economic recovery," said Xue Hua, an analyst at China Merchants Securities Co.

Out of the 39 industries the bureau surveyed, 14 reported their profit increased in the seven months compared with the first half. For example, the rubber industry saw a 34.3 percent increase in profit while the general equipment manufacturing industry posted a 3.9 percent rise, according to the bureau.

Another nine industries, including oil exploration, steel makers and non-ferrous metals, reported a slower decline in their earnings compared with the first half of the year.

The revenue for industrial companies totaled 21.4 trillion yuan, rising 0.9 percent in the first seven months compared with a 0.5 percent gain in the first half, the bureau said.

The country's industrial output may grow 11.5 percent in the third quarter of this year on an annual basis, faster than the 10.8 percent in the second quarter, a report by the Ministry of Industry and Information Technology and the Chinese Academy of Social Sciences said.

But the report warned that industrial firms would be hard pressed for their profit to rise this year.