Profits of China’s major industrial firms dropped 36.7 percent year-on-year in the first quarter (Q1) amid the COVID-19 pandemic, with the decline narrowing 1.6 percentage points from the first two months, official data showed on Monday.
Of 41 surveyed industrial sectors, 39 reported falls in profits while two recorded growth in the first three months. Tobacco industry profits were up 28.5 percent, and the farm and sideline food processing sector reported 11.2 percent year-on-year growth during the period, according to data from the National Bureau of Statistics.
Mining industry profits in Q1 dropped 27.5 percent to 88.14 billion yuan ($12.45 billion), and manufacturing sector profits fell 38.9 percent to 607.96 billion yuan.
Specifically, profits of state-owned industrial firms declined 45.5 percent from one year earlier to 222.67 billion yuan, while private firms’ profits fell 29.5 percent year-on-year to 234.48 billion yuan in the first three months.
A rebound began in March, with declines narrowing and eight firms reporting growth, up from four from the first two months, said Zhang Weihua, an official with the NBS.
The electronics and beverage sectors, among others, reversed their negative growth in March – the two industries declined 87 percent and 21.9 percent respectively in the first two months and rose 19.5 percent and 7.5 percent in March, according to Zhang.
Although the rebound began in March, profit prospects for major industrial firms are not yet optimistic as market demand has not been completely restored, corporate inventories continue to rise and cost pressure persists, Zhang said.
The contraction met market expectations as the viral epidemic largely hit industrial firms in Q1, in the first two months in particular, Liu Xuezhi, a macroeconomics expert at the Bank of Communications, told the Global Times on Monday.
Chinese industrial profits are likely to contract 10 percent year-on-year in the second quarter – a further rebound as domestic companies have been resuming work and production since March, Liu forecast, adding that expansion will persist in Q3 as the domestic economy starts to embrace recovery.
The daily necessities manufacturing sector will see a quick rebound in the second quarter since increased market demand will be released as the virus gradually comes under control in the country, Liu said. “But as COVID-19 has spread worldwide, the export manufacturing industry will continue to be impacted due to sluggish global demand,” he said.
Strengthened efforts are needed to implement government policies, helping companies weather the difficult times to maintain the stable growth of the industrial economy, said Zhang, the official.
China’s work and production resumption has been gradually approaching or has returned to normal levels. By April 21, 99.1 percent of major industrial companies in China had resumed operations and 95.1 percent of employees had returned to work, according to the latest data released by the Ministry of Industry and Information Technology.
Aerial photo taken on April 17, 2020 shows greenhouses for flower cultivation in Zhouning County, southeast China’s Fujian Province. For years, Zhouning took advantage of local natural environment and promoted flower industry development. The county has over 2,000 mu (about 133 hectares) of flower and sapling planting area. The production value in 2019 topped 90 million yuan (about 12.7 million U.S. dollars), which helped over 40 households in poverty increase incomes. (Xinhua/Jiang Kehong)
