Profits at China’s industrial firms plummeted 38.3 per cent from a year ago in the first two months of 2020, with the biggest loss on record offering fresh evidence of the overwhelming impact of the coronavirus on the world’s second largest economy.
Earnings for large companies with annual revenue of more than 20 million yuan from their main operations tumbled to 410.7 billion yuan (US$56 million) for January and February, according to data released by the National Bureau of Statistics on Friday.
The drop was larger than the 37.3 per cent contraction in the first two months of 2009 amid the global financial crisis, at a time when China had just rolled out its 4 trillion yuan (US$586 billion) stimulus package.
A total of 37 out of the 41 industrial divisions witnessed a decline, with only the tobacco, non-ferrous metal smelting and rolling, oil and gas extraction and food processing sectors showing an increase.
The overseas epidemic is still growing … the global synchronised economic downturn is hard to change
Liang Zhonghua, chief macro analyst at the research institute of Zhongtai Securities, said China's economic growth rate in the first quarter of 2020 is expected to be negative as economic activities have not returned to normal, especially in catering and tourism.
“The overseas epidemic is still growing … the global synchronised economic downturn is hard to change,” he added.
China’s industrial arm has still not fully recovered from the extended Lunar New Year holiday and lockdowns which were implemented to control the spread of the coronavirus. As of Monday, Hubei province reported 85 per cent of its industrial enterprises had resumed operations.
Profits within petroleum, coal and other fuel processing industries dropped 116.7 per cent, manufacturing firms fell 42.7 per cent, while the mining sector saw a decline of 21.1 per cent and the utilities sector a drop of 23.2 per cent.
Foreign and private firms suffered greater losses than their state-owned peers, with the private sector down 36.6 per cent. Hong Kong, Macau, Taiwan-invested enterprises dropped 53.6 per cent.
“Enterprises are accelerating their pace of resuming work and production, the short-term impact caused by the epidemic will gradually ease, the efficiency of industrial enterprises will effectively improve,” said Zhang Weihua, deputy director of industrial department at the NBS.
Overall, revenue from the main business and other business operations of China’s industrial enterprises dropped 17.7 per cent.
China has successfully brought the domestic outbreak of the virus under control, with only one of 55 new cases reported on Friday attributed to a local transmission.
But in response to a potential second wave of infections from imported cases, on Thursday China banned most foreigners from entering the country from midnight on Friday. Airlines were also ordered to cut the number of international flights.
Also on Thursday, the Group of 20 (G20) leaders pledged to inject US$5 trillion in fiscal spending into the global economy to blunt the impact of the coronavirus and “do whatever it takes to overcome the pandemic”.
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This article Coronavirus: China’s industrial firms’ profits plummeted almost 40 per cent at start of 2020 first appeared on South China Morning Post