COVID Restrictions Affect Industries In China; Industrial Profit Down During January-October

Profits of China’s industrial companies have witnessed a decline in the first 10 months of 2022, mainly due to coronavirus-induced restrictions and falling factory-gate prices. Industrial profits in the January-October 2022 period fell 3 per cent from a year earlier, compared with a 2.3 per cent decline in January-September 2022, according to data from China’s National Bureau of Statistics (NBS).

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Profits for 22 of China’s 41 major industrial sectors declined in during January-October 2022, according to a Reuters report based on the NBS data. Profits for manufacturers were down 13.4 per cent in the first 10 months, slightly lower than the 13.2 per cent fall in January-September.

“Recent outbreaks of domestic epidemics have frequently occurred, the risk of global economic recession has intensified, and industrial enterprises are facing greater pressure,” the NBS said in a statement.

It added that the structure is in general improved while the profit is dropping. “The Covid outbreaks in China and the recession risks of the global economy may add more pressure to the recovery of industrial profits. The Bureau has not released monthly data since June.

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“Industrial profits continued to come under pressure as prices were weighed down by overall weak domestic demand and input costs remained high in some manufacturing sectors,” according to a Reuters report which quoted China Everbright Bank analyst Zhou Maohua as saying.

China on Monday posted record high COVID-19 infections.

Petroleum, coal and fuel processing industries showed the steepest declines, which saw profits decline by 70.9 per cent, compared with a 67.7 per cent drop for the first nine months. In the mining sector, profits grew 60.4 per cent in January-October, against a 76 per cent gain for the first nine months.

Profits in the mining sector rose 60.4 per cent in January-October, compared with the 76 per cent gain reported for the first nine months.

The Reuters report said some analysts expect China’s GDP to contract in the current quarter as compared with the third quarter, and have cut their 2023 forecasts, predicting the path to reopening the economy will be slow and bumpy. Analysts from Nomura expect fourth-quarter GDP to shrink 0.3 per cent from the preceding three months, and cut their fourth-quarter growth forecast on a year-on-year basis to 2.4 per cent from 2.8 per cent.

According to a Bloomberg report, protests have spread across China over Covid restrictions as citizens took to the streets and university campuses, venting their anger and frustrations on local officials and the Communist Party. There was heavy police presence in some areas where huge crowds gathered in Shanghai, and demonstrations were also reported in the capital Beijing.

Last month, China’s industrial output grew 5 per cent, missing expectations of a 5.2 per cent gain and slowing from the 6.3 per cent growth seen in September.

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