China factory profits shrink further

A worker drives a forklift to transport aluminum bars at a factory in Anshun, Guizhou province, China, July 1, 2013.
A worker drives a forklift to transport aluminum bars at a factory in Anshun, Guizhou province, China, July 1, 2013. PHOTO: REUTERS

BEIJING • Profits at Chinese industrial firms last month were down 1.4 per cent from levels a year earlier, marking a sixth consecutive month of decline, data from the statistics bureau showed yesterday.

Industrial profits - at big enterprises whose annual revenue from core operations exceeds 20 million yuan (S$4 million) - fell 1.9 per cent year on year in the first 11 months of the year, the National Bureau of Statistics (NBS) said on its website.

Levels saw some improvement from the month before. In October, they fell 4.6 per cent year on year.

The NBS said investment returns for industrial companies last month were up year on year by 9.25 billion yuan.

A jump in profits last month from the auto manufacturing and electricity sectors, up 35 per cent and 51 per cent year on year respectively, helped narrow overall declines, the statistics bureau said.

Mining continued to lag behind, with profits falling 56.5 per cent in the first 11 months of the year from levels a year earlier, according to NBS data.

Aluminium producer China Hongqiao said early this month that it would cut annual capacity by 250,000 tonnes immediately to curb supplies.

Eight Chinese nickel producers, including state-owned Jinchuan Group, said they would cut production by 15,000 tonnes of the metal this month and reduce output next year by at least 20 per cent compared with this year - in a bid to lift prices from their worst slump in more than a decade.

The producer price index (PPI) contracted by 5.9 per cent last month from what was recorded a year earlier, recent data showed. The PPI has been in negative territory for nearly four years, which points to weak domestic demand and overcapacity.

China's top leader last week outlined the main economic targets for next year after wrapping up the annual Central Economic Work Conference, where it was said that the government would push forward "supply-side reform" to help generate new growth engines in the world's second-largest economy while tackling factory overcapacity and property inventories.

Chinese companies are combating high debt levels, and a growing number are struggling to make bond payments on time this year.

The heavy industry, construction and mining sectors remain under severe pressure from slowing demand and falling prices.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 28, 2015, with the headline 'China factory profits shrink further'. Print Edition | Subscribe