The profits of China’s large industrial companies collapsed in the first quarter of this year due to restrictions associated with coronavirus.
During the first three months, the profit of participants in this segment fell by 36.7%, which led to a significant decrease in the profitability of oil and gas companies (187.9%). A year ago, companies posted a quarterly profit of 28.5 billion yuan ($ 4 billion), compared with a 24.7 billion yuan loss this year.
Large enterprises in the metallurgy and engineering sectors recorded a 84.3% decline in profits. In the automotive industry, this figure was 80.2%, and in the chemical industry – 56.5%.
Only representatives of the food industry and tobacco production reported positive results for the quarter.
The profit of state-owned industrial enterprises fell by 45.5%, and private sector enterprises by 29.5%.
Preliminary figures for the second quarter indicate the problem of the resumption of the country’s economy, which is currently suffering from a significant drop in demand.
“It should be noted that, although in March the situation with the profit of industrial enterprises improved slightly, weak market demand provoked a drop in product prices and excessive accumulation of goods in warehouses. We must carefully implement various strategies and measures to stimulate economic and social development, actively help enterprises overcome difficulties, stabilize and stimulate the stable functioning of the industrial economy, ”the National Bureau of Statistics of China said in a statement.
Statistics show that the economy is recovering slowly but consistently. According to the estimates of the Trivium China consulting company, business activity in the country is at the level of 82.8% of the pre-virus indicator, while large companies resume their activities more successfully than smaller partners.
However, now the business is experiencing a second wave of economic shock, since isolation in other parts of the world destroys demand and leads to a reduction or complete cancellation of export contracts.
The economy of the Middle Kingdom declined by 6.8% in the first quarter, which was the first quarterly contraction since the advent of such data in 1992. The economy of Hubei (the epicenter of the virus outbreak in China) has fallen by 40%.
According to CPB World Trade Monitor, global trade dipped 1.5% in February. Given that some of the largest economies in the West were blocked in March and April, it is expected that these months will get even worse.
Earlier in April, the WTO predicted that, depending on the severity of the pandemic, global trade in 2020 would decline by 13–32%.