The Chinese economy is tired of recovering – Economics – Kommersant

Since the beginning of the year, the profits of industrial companies in China have sharply decreased – in January-February, the drop was 22.9% compared to the same period last year. For the whole of 2022, this figure decreased by only 4%. Experts believe that the reason for the drop in profits was weak demand for products from companies and the public, which cannot recover from the consequences of the COVID-19 pandemic and the associated severe lockdowns imposed by the country’s authorities.

Profit data for the first two months of the year for industrial companies with annual revenues of at least 20 million yuan ($2.9 million) published today National Bureau of Statistics of the People’s Republic of China (NSB). NSB representative Sun Xiao explained the decline by weak demand for industrial products, which could not compensate for the growth in companies’ costs, which ultimately affected profits. For the whole of 2022, the profits of industrial companies in China decreased by only 4%.

The profits of foreign industrial companies in China in January-February fell even more – by 35.7%. For all of 2022, the decline was 9.5%. In private industrial companies in China, profits have decreased since the beginning of the year by 19.5%, and in state-owned ones – by 17.5%.

In general, according to Reutersprofits declined for companies in 28 of China’s 41 manufacturing segments.

In industries such as the production of computers, telecommunications and other electronic equipment, the drop in profits was up to 77%. Profit growth since the beginning of the year was recorded only in two sectors – power generation (+53%) and solar and battery production (+41.5%), which is explained by the growth of energy consumption at enterprises and growth in demand from electric vehicle manufacturers.

The data was noticeably disappointing to analysts, who had expected the Chinese economy to continue to recover after the country’s tough coronavirus restrictions were lifted last year.

“We expected that profits in the Chinese industrial sector would show a more modest decline in the first two months of 2023,” the expert said. Bloomberg Economics, former analyst at Barclays Investment Bank Eric Zhu. — But profits just collapsed. Obviously, the stimulus from the lifting of covid restrictions has not yet begun to work properly – it will take more time.”

Other experts see the rise in inflation as the reason for the collapse in profits. “Companies have not been able to pass on their increased costs to end consumers as demand has not yet recovered enough,” Michel Lam, an economist at Societe Generale, was quoted as saying by Bloomberg.

Evgeniy Khvostik