China’s Dec industrial profits down

Beijing, January 27

Profits earned by Chinese industrial firms in December fell 4.7 per cent 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 from their main operations — fell 2.3 per cent in 2015 from 2014, National Bureau of Statistics(NBS) said today. That compared with 3.3 per cent growth in 2014.

December’s profit decline quickened from November’s 1.4 per cent 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.

The NBS said industrial firms’ interest payments fell 2.3 per cent 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 mining sector, often a laggard among all groups, tumbled 58.2 per cent in 2015, due partly to a supply glut and falling commodity prices.