China’s industrial profit falls sharply in April amid COVID restrictions | Business

Profits shrink 8.5 percent year-on-year as lockdowns squeeze margins and disrupt factory activities.

Profits at China’s industrial companies fell at their fastest pace in two years in April as high commodity prices and supply chain chaos caused by COVID-19 squeezed margins and disrupted factory activity.

Profits shrank 8.5 percent from a year earlier, the statistics bureau said on Friday, after rising 12.2 percent in March, according to Reuters calculations based on official data. The slump is the biggest since March 2020.

The industrial sector has been hit hard by the strict and widespread anti-virus measures that have resulted in the closure of factories and congested highways and ports.

Industrial output from the commercial hub of Shanghai, located at the heart of the Yangtze River Delta’s manufacturing sector, fell 61.5 percent in April amid a full lockdown, much more sharply than the nationwide 2.9 percent drop.

Industrial enterprise profits rose 3.5 percent year on year to 2.66 trillion yuan ($395 billion) in the January-April period, slowing from an 8.5 percent increase in the first three months, the statistics bureau said .

The world’s second largest economy saw very weak activity growth last month as exports lost momentum and the real estate sector faltered.

“Reasonable Economic Growth”

On Wednesday, Premier Li Keqiang acknowledged the sluggish economic growth, saying the difficulties in some aspects are worse than in 2020, when the economy was first hit by the COVID-19 outbreak.

“We should strive to ensure reasonable economic growth in the second quarter, reduce the unemployment rate as soon as possible and keep economic operations reasonable,” Li was quoted as saying at the meeting.

China recently cut interest rates on corporate and household loans for the second straight day and lowered a benchmark mortgage rate for the first time in nearly two years.

While policymakers have pledged more support for the faltering economy, many analysts have lowered their full-year growth forecasts, noting that the government has shown no signs of easing its “zero-COVID” policy.

Liabilities to industrial firms rose 10.4 percent year-on-year at the end of April, slightly slower than the 10.5 percent growth seen at the end of March.

The industrial earnings data covers large companies with annual revenues over 20 million yuan (US$2.97 million) from their main operations.

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