BEIJING—Profits at China’s industrial firms fell at their fastest pace in two years in April as high raw material prices and supply chain chaos caused by COVID-19 curbs squeezed margins and disrupted factory activity.
Profits shrank 8.5 percent from a year earlier, swinging from a 12.2 percent gain in March, according to Reuters’ calculations based on National Bureau of Statistics (NBS) data released on Friday. The slump is the biggest since March 2020.
“In April, frequent COVID-19 outbreaks were widespread in some regions, creating big shocks to the production and operations of industrial firms and leading to a drop in their profits,” Zhu Hong, senior NBS statistician, said in a statement.
Zhu confirmed the 8.5 percent decline in April in the statement.
While high bulk commodity prices drove up the profit growth of some upstream industries—with the mining sector soaring 142 percent—manufacturing firms saw their profits dive 22.4 percent.
The COVID-hit eastern and northeastern regions suffered profit declines in the first four months of 16.7 percent and 8.1 percent, respectively, Zhu said. The autos factory sector dragged down manufacturing profits by 6.7 percentage points in April.
Industries have been hit hard by stringent and widespread anti-virus measures that have shut factories and clogged highways and ports.
Industrial output from the commercial hub of Shanghai, located at the heart of manufacturing in the Yangtze River Delta, nosedived 61.5 percent in April, amid a full lockdown and much steeper than the 2.9 percent drop nationally.
Industrial firms’ profits grew 3.5 percent year-on-year to 2.66 trillion yuan ($395.01 billion) for the January–April period, slowing from an 8.5 percent increase in the first three months, the statistics bureau said.
China saw very weak activity last month as exports lost momentum and the property sector wobbled.
On Wednesday, Premier Li Keqiang acknowledged the weak growth and said economic difficulties in some aspects were worse than in 2020 when the economy was first hit by the COVID-19 outbreak.
China recently cut its benchmark lending rates for corporate and household loans for a second straight month and lowered a key mortgage reference rate for the first time in nearly two years.
Many analysts have downgraded their full-year growth forecasts, noting the Chinese regime has shown no sign of relaxing its “zero-COVID” policy.
Liabilities at industrial firms jumped 10.4 percent from a year earlier at the end-April, slightly slower than 10.5 percent growth as of end-March.
The industrial profit data covers large firms with annual revenues of over 20 million yuan from their main operations.
($1 = 6.7340 Chinese yuan)
