Profits of China's major industrial firms dropped 36.7 percent year on year in first three months of the year, data from the National Bureau of Statistics (NBS) showed Monday, with declines narrowing in March as the economy began recovering from the strain of COVID-19.

According to the data (link in Chinese), the profits of China's major industrial firms declined to 781.45 billion yuan (110.43 billion U.S. dollars) in the first quarter. The decrease narrowed 1.6 percentage points from the 38.3 percent fall experienced in January and February.

"The resumption of work and production of enterprises continued to accelerate and sales of industrial products began to pick up," said NBS official Zhang Weihua in an analysis published on the agency's website (link in Chinese). "The corporate profits show some positive changes."

In the first quarter, industrial enterprises above designated size (annual turnover of over 20 million yuan), foreign-invested, Hong Kong Special Administrative Region (SAR)-, Macao SAR- and Taiwan-invested enterprises suffered the heaviest fall in profits of 46.9 percent, an improvement from the 53.6 percent in the first two months. 

Profits of joint-stock companies dropped by 33.0 percent, while for private companies the figure stood at 29.5 percent, both also narrowing.

However, profits of state-owned holding industrial firms dropped 45.5 percent for the quarter to 222.7 billion yuan, 12.6 percentage points higher than the first-two-month period.

During the same period, the manufacturing industry dropped 37.9 percent in profit, 4.8 percentage points better than that from January to February.

On the other hand, profits of the mining industry fell more quickly than in the first two months – 27.5 percent year on year. This may have been the result of the biggest downturn in the oil and gas extraction industry in March. Oil and gas itself saw a 23.7 percent increase in the first two months that was transformed into minus 45.6 percent in March, when the global oil prices vibrated dramatically and even once went to negative due to plunging demand caused by the pandemic. The profits of petroleum, coal and other fuel refining dropped 187.9 percent in the first quarter.

Data on March shows improvement

Focusing on March itself, the total profit of industrial enterprises above designated size fell by 34.9 percent year-on-year, a rise of 3.4 percentage points from January to February.

Specifically in the month, 28 of 41 major industries had either faster profit growth or a slower downturn than in January-February, with eight industries recording profit growth, four more than in January-February.

The profits of the daily necessities industry improved significantly in March. The agricultural and sideline food processing industry's profits increased by 28.7 percent year-on-year, a 26.5 percentage points jump than in January-February. And the food manufacturing industry's profits decreased by 16.4 percent, but narrowed the drop by 17.1 percentage points. More broadly, the profits of consumer goods manufacturing fell by 8.7 percent in March, narrowing the decline by 7.8 percentage points.

Although the situation of China's industrial profits improved last month, the profit decline of industrial enterprises has remained relatively low.

"Due to the fact that market demand has not yet fully recovered, enterprise product inventories have increased, industrial product prices have continued to fall and cost pressures are still large," said Zhang. "The profitability situation is still not optimistic."