China’s industry has suffered greatly due to COVID
2022.12.27 01:24
China’s industry has suffered greatly due to COVID
Budrigannews.com – Analysts predicted brighter long-term economic prospects following a U-turn in COVID policy, despite the fact that strict COVID 19-related restrictions disrupted factory activity and supply chains, further reducing profits at China’s industrial firms from January to November.
According to data released on Tuesday by the National Bureau of Statistics (NBS), industrial profits decreased by 3.6% between January and November compared to the same period last year to 7.7 trillion yuan ($1.11 trillion). That contrasts with a decrease of 3% from January to October. For November, no independent data were made available.
According to a statement issued by the bureau, senior NBS statistician Zhu Hong highlighted a rebound in COVID outbreaks and lackluster demand in November that stifled industrial production and increased pressure on Chinese businesses.
Profits have dropped as a result of anti-virus restrictions in major manufacturing hubs like Guangzhou and Zhengzhou, as well as the ongoing weight of a prolonged property crisis and slowing exports, according to analysts.
However, as the economy reopens next year, they anticipate a robust recovery, despite the likelihood of a further slump in the near future due to the sharp increase in infections brought on by the removal of restrictions.
Industrial output increased by only 2.2% from a year earlier last month, falling short of Reuters poll expectations of 3.6% and significantly below October’s growth of 5.0%.
The economy is still expected to struggle over the winter months as a large portion of the population becomes infected and is unable to work while recovering, despite Beijing eliminating some of the strictest anti-virus restrictions in the world at the beginning of December and announcing on Monday that quarantine requirements for inbound travelers would end on January 8.
According to Hao Zhou, chief economist at GTJAI, a surge in COVID infections in many cities could further reduce industrial profits in December.
However, as normal economic activity returns in January, a robust improvement is highly likely, and he called for robust and focused policies to assist private-sector businesses in the coming year.
Analysts at JP Morgan predicted that China’s domestic reopening, which occurred earlier and more quickly than anticipated, would result in a shorter period of transitional pain in the first quarter of 2023, followed by a sustained recovery from the second quarter that was above trend.
They raised their full-year GDP growth forecast for next year from 4% to 4.3% earlier this month, but cut their forecast for China’s current quarter’s year-on-year GDP growth rate to 2.2% from 2.7%.
Profits at private-sector businesses fell by 7.9% from January to November, which was a slight improvement from the 8.1% drop in the first ten months.
For 21 of 41 major industrial sectors, profits decreased, with the ferrous metals smelting and pressing industry experiencing the greatest decline, at 94.5 percent. That contrasts with the first ten months’ decline of 92.7 percent.
In the first 11 months, manufacturers saw a 13.4% decline in profits, which was the same as the decline from January to October.
A survey conducted last week found that business confidence in China has dropped to its lowest level since January 2013, indicating the impact of rising COVID cases on economic activity.
Top leaders and policymakers pledged to intensify policy adjustments to support the slowing economy at this year’s Central Economic Work Conference.
One of the worst years in nearly half a century, China’s economic growth was just 3% in the first three quarters of this year, and it is expected to remain at that rate for the entire year.
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Industrial profit data include large businesses with primary operations that generate more than 20 million yuan in annual revenue.
