Profits at China’s industrial firms fell at their fastest pace in two years in April as high raw material prices and supply chain chaos caused by coronavirus curbs squeezed margins and disrupted factory activity. Profits shrank by 8.5 per cent from a year earlier, swinging from a 12.2 per cent gain in March, Zhu Hong, senior National Bureau of Statistics statistician, said in a statement on Friday. The slump is the biggest since March 2020. “In April, frequent Covid-19 outbreaks were widespread in some regions, creating big shocks to the production and operations of industrial firms and leading to a drop in their profits,” Zhu said. Did China just ‘lay the groundwork’ to abandon its 2022 GDP growth target? While high bulk commodity prices drove up the profit growth of some upstream industries – with the mining sector soaring by 142 per cent – manufacturing firms saw their profits dive by 22.4 per cent. The coronavirus-hit eastern and northeastern regions suffered profit declines in the first four months of 16.7 per cent and 8.1 per cent, respectively, Zhu said. The car factory sector dragged down manufacturing profits by 6.7 percentage points in April. Industries have been hit hard by stringent and widespread antivirus measures that have shut factories and clogged highways and ports. Industrial output from the commercial hub of Shanghai, located at the heart of manufacturing in the Yangtze River Delta, nosedived by 61.5 per cent in April, amid a full lockdown and much steeper than the 2.9 per cent drop nationally. “At present, virus containment in the Yangtze River Delta improved and work resumption is forging ahead steadily,” Zhu said, expecting the virus impact on industrial firms to be eased gradually. Industrial firms’ profits grew by 3.5 per cent year-on-year to 2.66 trillion yuan (US$395 billion) for the January-April period, slowing from an 8.5 per cent increase in the first three months, the statistics bureau said. The world’s second-largest economy saw very weak activity last month as exports lost momentum and the property sector wobbled. On Wednesday, Premier Li Keqiang acknowledged the weak growth and said economic difficulties in some aspects were worse than in 2020 when the economy was first hit by the Covid-19 outbreak. ‘War has killed orders’: Chinese producers lament loss of Russian business “We should strive to ensure reasonable economic growth in the second quarter, lower the unemployment rate as soon as possible, and keep economic operations within a reasonable range,” Li was quoted as saying at the meeting. China recently cut its benchmark lending rates for corporate and household loans for a second straight month and lowered a key mortgage reference rate. While policymakers have pledged more support for the faltering economy, many analysts have downgraded their full-year growth forecasts, noting the government has shown no sign of relaxing its “zero-Covid” policy. Liabilities at industrial firms jumped by 10.4 per cent from a year earlier at the end of April, slightly slower than 10.5 per cent growth as of the end of March. The industrial profit data covers large firms with annual revenues of over 20 million yuan from their main operations.