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Profits at China’s industrial firms during the first two months of the year plunged by the most since record-keeping began in 1990 as Beijing’s response to the COVID-19 pandemic brought the economy to a screeching halt.
Their earnings sank 38 percent from the prior year to 410.7 billion yuan ($58.15 billion), according to China’s National Bureau of Statistics. The data from January and February are combined to smooth the impact of the Chinese Lunar New Year.
“China’s economy is undergoing the most severe downturn in modern history,” wrote Mark Williams, chief Asia economist at the London-based research firm Capital Economics. “The fall in industrial production during January and February was the sharpest on record and suggests the industry component of GDP will contract sharply in the first quarter.”
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COVID-19, which originated in Wuhan, China, has infected 81,340 people in the country and killed 3,293, according to the latest data from Worldometer. In response to the virus, Beijing locked down hundreds of millions of people, paralyzing key economic sectors including mining, manufacturing and power.
Profits from petroleum, coal and other fuel-processing firms sank 116.7 percent and those from manufacturing companies fell 42.7 percent. Elsewhere, the mining industry saw a 21.1 percent drop and the utilities sector witnessed a 23.2 percent slide.
Just four sectors – tobacco products, non-ferrous metals, oil and gas exploitation and processing of non-staple agricultural goods – of the 41 that are counted saw their profits increase.
A sharp drop in industrial profit isn’t the only evidence that the Chinese economy is suffering. Manufacturing activity in February plunged at the fastest pace and to its lowest level on record. Additionally, vehicle sales saw a 79 percent drop, and retail sales tumbled 20.5 percent.
The economic fallout from the virus looks like it still hasn’t subsided even as China has started to emerge from the lockdown. “The economic recovery is taking longer,” Williams wrote.
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“Urban transport volumes have picked up but are a long way below normal as many are still not going to work,” he added. “Most shops have reopened, but footfall is low. A few cinemas have reopened but that is likely to be one of the last activities to return. Lingering concerns are reflected in the elevated number of online searches for the coronavirus.”