According to data released on Thursday, Chinese industrial profits declined far more than anticipated in the year to March, showing that the nation’s manufacturing industry was still having trouble recovering despite the easing of most COVID-related restrictions.
In the three months ending March 31, industrial profits decreased by 21.4%. According to figures from the National Bureau of Statistics. The decrease was far greater than the predicted reduction of 12%. And it contrasted sharply with the 8.5% increase observed during the same time period last year.
Industrial profits experienced their biggest decrease since mid-2020, at the height of the COVID pandemic. When they fell by approximately 23 percent in the first two months of 2023.
The result from Tuesday shows that pre-COVID levels of Chinese manufacturing activity, a typical economic harbinger, were still being maintain.
This year, the sector has faced significant challenges due to weak domestic and international demand as well as deteriorating the economy conditions in China’s biggest markets.
Despite an ongoing pricing war in the market for electric vehicles and weak car sales thus far this year. The automotive industry’s declining profits were a major drag on profit this year.
Given that the real estate sector makes up close to a quarter of the national economy, weak real estate investment also had an impact on industrial profitability. Real estate is a major source of demands for construction supplies and equipment.
According to figures released earlier this month, China’s industrial production increased 3.9% in March. However, the result fell just short of market expectations for the second consecutive month, falling short of estimates for increase of 4%.
The Chinese economy’s patchy recovery this year is further highlighted by weaknesses in the industrial sector. After the anti-COVID restrictions were lift, demand for travel and services spiked dramatically. But the manufacturing industry has mainly lagged behind this recovery.
In spite of this, China’s economy expanded by a larger-than-anticipated 4.5 percent in the first 3 month of the year, mostly due to a recovery in consumer spending.
Analysts are sceptical that this momentum will be sustained, especially given the challenges facing the manufacturing industry.