Compared with the first two months of the year 2020, China industries reported a surge of profits in March but the economy is still struggling to resume productions since many industries had declined significantly over the months due to the coronavirus outbreak.
The full recovery of the Chinese economy, which had been recently slightly improving due to the reopening of business markets after the virus hit, was hammered due to the second wave of infections and exacerbated the situations into a global recession.
Slight Profits Increase in March
According to data from the National Bureau of Statistics, Chinese industries had earned a total profit of 370.66 billion yuan ($52.43 billion) in March, but a sharp decline of 34.9% from a year earlier. The profit earned in March was a little better than the combined profits of the preceding two months since it was a 38.3% decline in profit in January-February, which showed the deepest drop since at least 2010.
Chinese industrial firms witnessed a profit slump to 36.7% on an annual basis to 781.45 billion yuan for the quarter ended March. The data indicated that some key sectors such as electronics and drink manufacturers had some recoveries in profits from the first two months.
Compared with the performance of January-February, the data showed that eight out of 41 sectors had reported a surge of profit in March. It meant that sectors including advanced manufacturing, private, small-scale, and foreign-invested companies showed better performance in March.
Amid the uncertainty over the virus pandemic in the coming days, Zhang Weihua, an official at the bureau, warned not to be too optimistic about the profits situation of the companies since market demand has not recovered completely, and production costs also remained relatively high.
China’s Economy Policies and Relief Measures
Factory gate prices, a key barometer for industrial demand, posted that Chinese industries had the deepest deflation in five months in March and the deep decline of profits for industrial firms in the first three months of the year had led to China’s economy shrank for the first time since at least 1992.
Iris Pang, chief economist at Greater China for ING, said, “China has faced a continued fall in demand for goods from foreign economies due to COVID-19’s impact on those economies’ job markets and wages growth.” Pang added, “Industrial profits will have to rely more on domestic demand. But conditions are not much better in China.”
The Chinese government introduced economic relief measures such as tax and credit relief for virus-hit firms since February, including cuts in borrowing costs even though top policy advisers have been urging for stronger fiscal stimulus. Analysts claimed that Beijing’s policies were less aggressive than the quantitative easing of other major central banks and the government had to adjust the need for stimulus against high household and corporate debt.
Chinese President, Xi Jinping had called for more investments in traditional industries such as transportation and energy as well as new infrastructure areas including 5G and artificial intelligence to boost the economy.
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