China’s industrial profits rise but bogged down in single-digit growth According to Reuters

© Reuters. FILE PHOTO: Workers work next to steel wire at a factory in Beijing, China November 22, 2017. Photo taken November 22, 2017. REUTERS / Stringer

BEIJING (Reuters) – Profit growth at China’s industrial firms accelerated in the first two months of the year along with other signs of momentum in the economy, although the outlook was clouded by the outbreak. Domestic COVID-19 and the war in Ukraine.

Profits rose 5.0% from a year earlier, up from 4.2% in December, the National Bureau of Statistics said Sunday.

Growth in January-February was driven by soaring profits in the energy and raw materials sectors, helped by higher prices of commodities like and coal. January and February data are often combined to smooth out deviations from the Lunar New Year holiday, which can fall in either month.

In contrast, monthly profit growth of other industrial players has been weighed down by high raw material costs, which have been in single digits since November.

Industrial profits grew slightly faster along with improvements in industrial output, retail sales and fixed asset investment in January-February, indicating the impact of recent policy measures. This is already starting to be felt.

However, challenges have emerged this year, including China’s most severe COVID-19 outbreak since the start of the pandemic in 2020, caused by the Omicron variant, which threatens to disrupt local economies and reduce consumer spending.

“The gap between upstream and downstream margins widened as downstream margins fell further,” Goldman Sachs (NYSE:) analysts wrote in a note. “We expect the COVID outbreak in many provinces to affect industrial profits in the near term.”

Due to the coronavirus outbreak, they can expect policies to ease monetary and fiscal measures even further.

Global upheavals such as the war in Ukraine also create uncertainty for international supply chains and the possibility of even higher commodity and energy prices, ultimately weighing on corporate profits. Chinese company.

Vice Premier Liu He recently said Beijing would take measures to boost the economy in the first quarter and monetary policy would be set to support growth.

To ease the financial burden on smaller companies, China has committed to a value-added tax (VAT) refund of about 1.5 trillion yuan ($240 billion).

China will waive the 3% VAT on some small companies, the country’s main source of jobs, the Finance Ministry said on Thursday.

The statistics bureau’s industrial profit data includes large companies with an annual revenue of more than 20 million yuan from their main operations.

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