- Industrial gains Jan-Oct -3.0% yoy versus -2.3% Jan-Sep
- Risks reported from domestic COVID outbreaks and global recession
BEIJING, Nov 27 (Reuters) – China’s industrial firms saw overall profits fall further in the January-October period as COVID-19 outbreaks flared and cities imposed new virus restrictions, including targeted lockdowns, that dampened economic activity.
Industrial profits fell 3.0% year-on-year in the first 10 months of 2022. That compares to a 2.3% drop from January to September, data from the National Bureau of Statistics released on Sunday showed.
The bureau has not reported standalone monthly numbers since July.
Earnings fell in 22 of China’s 41 major industrial sectors.
“Recently, domestic epidemic outbreaks have been frequent, the risk of a global economic recession has intensified and industrial firms are under greater pressure,” the bureau said in a statement.
Weak data for the world’s second-largest economy also reflects a debt-ratio crisis in the country’s real estate sector and a sharp slowdown in consumer spending.
Outbreaks have only increased since October, and growing anger at China’s strict zero-COVID policy aimed at eradicating the virus sparked rare protests from citizens over the weekend. China reported a fourth straight day of record cases on Sunday.
Manufacturers’ profits fell 13.4% in the first decade, slightly lower than the 13.2% drop in January-September.
“Industrial profits continued to come under pressure as overall weak domestic demand weighed on prices and input costs remained high in some manufacturing sectors,” said Zhou Maohua, an analyst at China Everbright Bank.
Among the sectors that fell the most were the oil, coal and fuel refining industries, whose profits fell 70.9%. This contrasts with a decline of 67.7% in the first nine months.
In some sectors with strong earnings growth, the pace of growth slowed significantly.
In the mining sector, January-October earnings surged 60.4% compared to a 76.0% gain in the first nine months.
Some analysts now believe China’s current-quarter GDP could contract from the third quarter and have lowered their forecasts for 2023 as they predict the road to reopening the economy will be slow and bumpy.
Analysts at Nomura expect fourth-quarter GDP to contract by 0.3% from the previous three months and lowered their fourth-quarter growth forecast on an annualized basis to 2.4% from 2.8%.
Likewise, analysts at Oxford Economics have lowered their GDP forecasts for 2022 and 2023 as they believe lockdown measures are expected to be extended.
To shore up the faltering economy, authorities have recently introduced a range of measures, including measures to ease some COVID restrictions and financial support for the housing market, which have supported market sentiment.
On Friday, China announced it would cut the amount of cash banks are required to hold as reserves for the second time this year, freeing up about 500 billion yuan ($69.8 billion) in long-term liquidity.
Last month, China’s industrial production rose 5.0% yoy, missing expectations of a 5.2% rise in a Reuters poll and slowing from September’s 6.3% growth.
Industrial earnings data covers large companies with annual revenues over 20 million yuan from their main activities.
($1 = 7.1642 Chinese Yuan)
Reporting by Liz Lee, Liangping Gao and Ella Cao; Additional reporting by Wang Shuyan; Edited by Kim Coghill and Edwina Gibbs
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