China's industrial profits sink in deepening slump

Chinese industrial firms' profits contracted further in the January-November period of 2022 when strict COVID-19-related restrictions disrupted factory activity and supply chains as the virus spread through key manufacturing hubs.

Industrial profits fell 3.6%in the first 11 months of current year from the same time a year earlier to 7.7 trillion yuan ($1.11 trillion), according to data released by the National Bureau of Statistics (NBS) on Tuesday. That compares with a 3.0% drop for January-October.

The downbeat data reflects the toll that anti-virus curbs in many cities last month, including major manufacturing hubs Guangzhou and Zhengzhou, took on the world’s second-largest economy, adding to damage from a protracted property crisis and slowing exports.

Last month, industrial output rose only 2.2% from a year earlier, missing expectations for a 3.6% gain in a Reuters news agency poll and slowing significantly from the 5.0% growth seen in October.

Despite Beijing ditching some of the world’s toughest anti-virus restrictions in early December — and on Monday announcing it would stop requiring inbound travellers to go into quarantine starting from January 8 — the economy is still expected to struggle over the next few months as much of the population becomes infected and unable to work while recovering.

Business confidence in China has fallen to its lowest level since January 2013, a survey showed last week, reflecting the effect of surging COVID cases on economic activity.

At this year’s closed-door Central Economic Work Conference, top leaders and policymakers pledged to step up policy adjustments to support the slowing economy. But with businesses having anticipated a global recession in 2023 and the effect of a surge in domestic COVID infections, analysts say it may take at least another quarter before things turn around.

China’s economic growth was just 3% in the first three quarters of 2022 and is expected to stay around that rate for the full year, one of its worst years in almost half a century.

Industrial profit data covers large firms with annual revenues above 20 million yuan ($2.87m) from their main operations.