Monday 27 April 2020 9:24 am

China's industrial profits nosedive in the first quarter

China’s industrial profits improved modestly in March but the near 35 per cent fall indicates the country is still grappling with the effects of the coronavirus on the economy.

China’s industrial profits dropped 34.9 per cent in March, compared with a 38.3 per cent drop in the first two months, according to the National Bureau of Statistics.

Read more: China’s economy shrinks for first time in decades on coronavirus hit

Profits of Chinese industrial firms fell 36.7 per cent in the first quarter from a year earlier.

The figures come after China reported its first contraction in economic growth since the 1970s. Gross domestic product fell 6.8 per cent.

Companies in metal products, machinery and equipment sectors saw profits fall 84.3 per cent, while the automotive industry saw a 80.2 per cent decline. Among China’s 41 industrial sectors, all but two reported losses: tobacco and food processing.

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Chinese authorities shut down factories across the country as part of lockdown measures to battle the coronavirus outbreak. There is a concern that the outbreak in Europe and the US may hit demand.

Profits at state-owned industrial enterprises plunged 45.4 per cent, while those in the private sector fell 29.5 per cent.

Indeed, the data, alongside PPI and industrial production numbers, underline that China’s supply-side is recovering quicker than its demand side. Industrial production rebounded more sharply in March than today’s profits figures.

Read more: Tory MPs to scrutinise UK’s relationship with China amid anger over Covid-19 response

Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said: “Taken together, the numbers imply that firms decided to turn the machines back on even though demand was not there to support that, suggesting strong inventory build.”

“April is likely to exacerbate these trends, as external demand drops away.”

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