China industrial profits fall most since 2011 as economy slumps

A worker walks on scaffolding at a residential construction site in Hefei, Anhui province, China. Industrial profits tumbled 8.8 per cent in August from a year earlier, sharply down from 2.9 per cent decline posted in July, the National Bureau of Sta
A worker walks on scaffolding at a residential construction site in Hefei, Anhui province, China. Industrial profits tumbled 8.8 per cent in August from a year earlier, sharply down from 2.9 per cent decline posted in July, the National Bureau of Statistics (NBS) said on Monday (Sept 28).PHOTO: REUTERS

BEIJING (BLOOMBERG, XINHUA) - Chinese industrial companies' profits declined the most in at least four years, as the pillars of China's infrastructure-led growth model suffered from a devalued yuan, a tumbling stock market and weak demand.

Industrial profits tumbled 8.8 per cent in August from a year earlier, sharply down from 2.9 per cent decline posted in July, the National Bureau of Statistics (NBS) said on Monday (Sept 28). the National Bureau of Statistics said Monday in Beijing. It was the biggest drop since the government began releasing monthly data October 2011, according to data compiled by Bloomberg. The biggest drops were concentrated in producers of coal, oil and metals.

China's stock-market plunge and currency devaluation are adding new challenges for the world's second-largest economy as it struggles with excess capacity, sluggish investment and weaker manufacturing. The nation's official factory gauge slumped to a three-year low last month, while Bloomberg's monthly gross domestic product tracker remained below the government's 7 per cent goal in August with a reading of 6.64 per cent.

"Companies are facing enormous operational pressures," said Liu Xuezhi, a macroeconomic analyst at Bank of Communications Co. in Shanghai. "The momentum of growth is weak, and the downward pressure on the economy is relatively large."

Profits in coal mining plunged 64.9 per cent in the first eight months of this year from the same period last year, while oil and gas profits tumbled 67.3 per cent, the report said. Ferrous metal smelting earnings fell 51.6 per cent.

The Shanghai Composite Index retreated 0.2 per cent to 3,086.34 as of 11:30 am local time.

Contributions from investment returns fell amid China's stock-market rout, while exchange-rate losses rose "noticeably" due to yuan volatility, pushing the companies' financial costs up by 23.9 per cent last month from a year earlier, compared to a 3 per cent drop in July, according to the bureau.