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Wednesday, January 27, 2016, 10:55

China's industrial profit decline quickens

By Agencies
China's industrial profit decline quickens
Source: National Bureau of Statistics.

BEIJING - Profits earned by Chinese industrial firms in December fell 4.7 percent from a year earlier, the seventh straight month of declines, as the slowing economy hits sales and forces many companies to cut prices to win business.

The weak performance is bound to spark fresh concerns about investment cuts, job losses and bad loans in the world's second-largest economy, and could put more pressure on China's stock markets, which have been pummelled to 14-month lows.

Industrial profits - which cover large enterprises with annual revenue of more than 20 million yuan (US$3.1 million) from their main operations - fell 2.3 percent in 2015 from 2014, the National Bureau of Statistics(NBS) said on its website on Wednesday.

That compared with 3.3 percent growth in 2014.

December's profit decline quickened from November's 1.4 percent drop, marking the longest period of monthly slides since the NBS started collecting the data in 2011.

High costs and tight liquidity curbed companies' production and operations, along with weak domestic and global demand, the NBS said.

"Falling producer prices have further squeezed firms' earnings," said He Ping, an NBS official said in a statement.

The NBS said industrial firms' interest payments fell 2.3 percent in 2015 as interest rate cuts helped lower costs, though most economists say borrowing costs remain too high.


With slowing economic momentum squeezing cash flows and margins for companies across a growing swathe of sectors, profit warnings have flooded out in recent weeks, most notably from firms in the mining and energy sectors.

Profits in the mining sector, often a laggard among all groups, tumbled 58.2 percent in 2015, due partly to a supply glut and falling global commodity prices.

China Metal Resources Utilization, for example, said on Jan 22 that 2105 profits are expected to decrease substantially, while China Coal Energy said it was expecting to post a loss.

Among 41 industrial sectors, 29 had year-on-year profit growth in 2015, while 12 reported declines, the NBS data showed.

State-owned firms fared the worst among all companies. Their profits slumped 21.9 percent in 2015 from a year ago, compared with private firms which saw profits rise 3.7 percent.

State-owned firms account for a third of total industrial enterprise profits, according to estimates from ING.

China's economic growth cooled to 6.9 percent in 2015, the slowest pace in a quarter of a century, weighed down by weak demand at home and abroad, industrial overcapacity, slowing investment and a struggling property market.

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