China's industrial profits fall most since 2011 as economy slows

Industrial profits declined 8 per cent in December from a year earlier, the National Bureau of Statistics said in Beijing on Tuesday. -- PHOTO: BLOOMBERG
Industrial profits declined 8 per cent in December from a year earlier, the National Bureau of Statistics said in Beijing on Tuesday. -- PHOTO: BLOOMBERG

BEIJING (Bloomberg) - Chinese industrial companies' profits fell the most in at least three years last month, underscoring the challenge facing the nation's former growth drivers as the economy slows and commodity prices slump.

Industrial profits declined 8 per cent in December from a year earlier, the National Bureau of Statistics said in Beijing on Tuesday. That's the biggest drop since at least October 2011, according to data compiled by Bloomberg.

China's old growth drivers are faltering, weighed by overcapacity and a property downturn. Services companies are faring better, bolstering an economy that expanded at the slowest pace in 24 years in 2014.

"The upstream industries, from mining to oil exploration, are hurting badly from falling input prices, while some manufacturers are benefiting," said Ding Shuang, a senior China economist with Citigroup in Hong Kong. "A deeper fall in industrial profits will damp investment activity to weigh on future growth."

The fall in raw material supply profitability and the rise in consumer product manufacturing profitability showed China's "growth is shifting from an investment-driven model to a consumption-led one," the NBS said in a statement.

A manufacturing gauge recovered lost ground in January, suggesting stimulus measures have helped stabilize the world's second-largest economy. The preliminary Purchasing Managers' Index from HSBC and Markit Economics was at 49.8, exceeding the median estimate of 49.5 in a Bloomberg survey and up from December's 49.6, a Jan. 23 report showed. Numbers below 50 indicate contraction.

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