China's Covid restrictions pulled away industrial profits in 2022

China's industrial profits declined 3.6 per cent during the 11-month period between January-November period as Beijing's 'zero Covid policy' disrupted factory activity and supply chains. However, as China loosened its grip over Covid restrictions as 2022 proceeded to its conclusion in December, analysts have foreseen brighter long-time prospects.

Industrial profits fell in January-November from 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 per centdecline for January-October. No standalone data was released for November.

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Statisticians from NBS said that Covid outbreaks and slow demand in November decreased industrial production have increased pressure on Chinese businesses.

For January-November, profits at private-sector firms shrank 7.9 per cent, a slight improvement from the 8.1 per cent fall in the first 10 months.

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Profits fell for 21 of 41 major industrial sectors, with the steelindustry suffering the steepest decline, at 94.5 per cent. That compares with a 92.7 per cent fall for the first 10 months.

Profits for manufacturers were down 13.4 per cent in the first 11 months, matching the fall in January-October.

Despite Beijing ditching some of the world's toughest Covid restrictions in early December, the economy is still reeling under the impact of restrictions that gripped the country for most of 2022.

JP Morgan analysts said China's domestic reopening, which came earlier and faster than expected, would mean a shorter period of transitional pain in the first quarter of 2023, followed by an above-trend sustained recovery from the second quarter.

Earlier this month, JP Morgan trimmed their forecast for China's year-on-year GDP growth rate for the current quarter, to 2.2 per cent from 2.7 per cent, but raised their full-year growth forecast for next year, to 4.3 per cent from 4 per cent.

(With inputs from agencies)

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