Profit growth is accelerating in Chinese industry

The growth of profits of Chinese industrial enterprises accelerated in the first two months of the year, according to Handelsblatt.

Surpluses averaged 5.0% year-on-year in January and February, the Beijing Statistics Office said on Sunday. At the end of 2021, the surplus was only 4.2%.

The driving force was the energy and raw materials sector, which benefited from higher crude oil and coal prices, for example. The figures for January and February are usually combined to offset the distortions caused by the Chinese New Year.

However, the world champion China is facing difficult times due to the Corona cases and the consequences of the Russian invasion of Ukraine.

“We expect the Covid epidemic in several provinces to boost the industry’s profits in the short term,” said analysts at US bank Goldman Sachs. They assume that the government and the central bank will take measures to support the economy. For example, the war in Ukraine could disrupt international supply chains and push up commodity and energy prices, which could hurt Chinese companies’ profits.

Leadership in Beijing is already helping domestic small businesses with billions of dollars in tax breaks. Tax cuts of almost one trillion yuan (about 143 billion euros) were decided for them.

The world’s second largest economy after the US is struggling with the resurgence of the Corona pandemic. The spread of the highly contagious omicron variant hit major manufacturing hubs such as Shenzhen and Dongguan this month. There, assembly lines stopped at many factories – from factories that make computer accessories, such as flash drives, to car parts.

The government wants to increase gross domestic product by about 5.5% this year. To achieve this, the central bank is likely to cut interest rates in the coming months in order to boost both investment and consumption with cheaper loans, experts say.