China is experiencing one of its worst earnings slumps. The “Zero Covid” policy adopted in the country and the real estate crisis affected many companies. Nearly 5,000 Chinese companies in Beijing, Shanghai and Shenzhen have released results for the first half of 2022. The data is disastrous.
According to Wind and Choice, a financial information organization, just over 50% has seen a drop in net income (the real profit of the company). The numbers were almost as bad as 2020, when all companies celebrated their worst season in business due to the Covid-19 pandemic. At that time, profits of nearly 55% of institutions declined in the first six months.
However, the start of this year appears to have been worse. About 900 companies have reported losses so far. In 2020, he lost 780 money. Declining profits in the world’s second largest economy could wreak havoc across the planet. It is Chinese companies that buy goods, technology and other products on a large scale.
Some economists are blaming strict Covid-19 restrictions on the country and the growing crisis in the Chinese property market. Economist Alicia Garcia Herrero explained in an interview with CNN International.
So far, China has steadfastly maintained the “Covid-19” policy. Restrictions range from the movement of people to closures City shots. Even traveling to the country has restrictions.
The country’s financial center, Shanghai, had a population of 25 million and was even less Close For two months at the beginning of 2022. And it’s not just the country’s capital, on the first Thursday of Thursday, Chengdu quarantined just over 20 million people.
In the second quarter of this year, China’s GDP grew by only 0.4%. This is the weakest performance since the beginning of 2020. In 2021, many investment banks lowered their forecasts for the country’s economic growth to 3%.
Analyzers NomuraLtd., a Japanese financial insurer, also expressed concern about the current situation in China in a report released on Friday 2. “If Beijing decides to start easing the ‘Covid Zero’ policy from March 2023, we expect the economy and markets to continue a difficult period.” , He said. “People will be disappointed that there is no real opening up or they will be overwhelmed by the spread of Covid-19 infection.”
Who loses more?
Technology companies are suffering the most from the country’s poor performance. The second quarter of this year marked the end of the growth of Alibaba – a Chinese multinational technology company. Tencent (a technology and entertainment company) saw its first quarterly drop in sales.
For other industries, 2022 is the worst year yet. The three largest airlines in China (Air China, China Southern Airlines, and China Eastern Airlines) recorded record losses. The total amount reaches 50 billion yuan (just over 37 billion RMB) in the first half. Everyone blamed the drop in travel for Covid-19 restrictions. In addition, the national currency, the yuan, has fallen nearly 10% against the dollar this year.
Real estate also saw its worst performance so far. This sector accounts for 30% of the national GDP and has been hampered by government policy that has limited “reckless” loans to the industry.
The crisis has only escalated in the past six months, as thousands of disgruntled citizens have threatened to stop paying mortgages on unfinished homes. This shook the market and prompted companies and authorities to take other measures in an effort to end the crisis. Country Garden, the nation’s largest selling real estate company, reported a drop of just over 95% in net income in the first six months.
The company said in a statement that it had been “under pressure from forces beyond its control, such as the re-emergence of the epidemic in various parts of mainland China and severe weather, which combined with the slowdown in the real estate sector.”
Read also: “Covid Zero” madness in ChinaCristian Costa reports on issue 112 of Revista Oeste.
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