China industrial profits plunge 38% on year in Jan-Feb

March 27, 2020 11:12
Chinese industrial enterprises saw their production and sales activities get hugely disrupted due to curbs imposed by authorities in the wake of the coronavirus outbreak. Photo: Beijing

Profits at China's industrial firms plunged in the first two months of the year to their lowest in at least a decade following widespread factory shutdowns in the wake of the coronavirus crisis.

Industrial firms posted a 38.3 percent slide in combined profit in the two months to February, compared to the same period last year, to 410.7 billion yuan (US$58.15 billion), Reuters reports, citing data released by China's National Bureau of Statistics (NBS).

It marked a worsening from a 6.3 percent fall seen in December last year, and was the steepest decline since 2010, according to the report.

The reading combines the results for January and February to exclude distortions caused by the week-long Lunar New Year.

Industrial production and sales declined significantly amid epidemic control efforts, while the costs of labor and depreciation continued to put pressure on companies, an NBS official was quoted as saying in a statement published alongside the data.

An overwhelming majority of industries saw profits decline, from automobiles to chemicals.

The weakness in profits was in line with broader pressures on Chinese factories.

Manufacturing output plummeted at the sharpest pace in three decades in the first two months as the virus outbreak interrupted normal production, while factory gate prices fell more than expected in February and erased the slight recovery in January.

The outbreak escalated just as many businesses were closing for the long holiday break in late January, and widespread restrictions on transportation and personal travel, as well as mass quarantine, delayed their reopening for weeks.

The decline in profits points to lingering trouble for the manufacturing sector, which is wrestling with fallout from the health crisis that has severely hurt output and is expected to halve economic growth in the current quarter compared with the previous three months.

For the first two months, profits at state-owned industrial firms dropped 32.9 percent on year, while private-sector profits fell 36.6 percent.

Liabilities at industrial firms grew 5.3 percent on year at end-February, compared with a 5.4 percent increase as of end-2019.

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