China industrial profits shrink again in December

A photograph of entrepreneurs, including the owner of a local shoe manufacturer, with then Chinese President Hu Jintao during a visit to Spain sits at an industrial complex undergoing demolition along Xiedu Avenue, which translates to "Shoe Capital"
A photograph of entrepreneurs, including the owner of a local shoe manufacturer, with then Chinese President Hu Jintao during a visit to Spain sits at an industrial complex undergoing demolition along Xiedu Avenue, which translates to "Shoe Capital" avenue, in Wenzhou, China, on Jan 14. In the city made famous by the billionaire entrepreneurs it spawned in the heyday of China's manufacturing ascent, there is now an air of crisis.PHOTO: BLOOMBERG

BEIJING • Earnings at China's industrial firms shrank for a second straight month in December on slowing prices and sluggish factory activity, piling more pressure on an economy in the grip of its slowest growth in nearly three decades.

The downbeat data points to more troubles ahead for the country's vast manufacturing sector already struggling with a decline in orders, job layoffs and factory closures amid a bitter trade dispute with the United States.

China's economic growth slipped to 6.6 per cent last year, the weakest expansion in 28 years, stoking fears of a sharper slowdown if the current US-China trade talks fail to stop further tariffs from being implemented after a 90-day truce.

Profits last month fell 1.9 per cent from a year earlier to 680.8 billion yuan (S$136.7 billion), weighed down by weak factory-gate prices and soft demand. This is on top of a decline of 1.8 per cent in November - the first contraction in profits in nearly three years.

For the full year, profits rose 10.3 per cent to 6.64 trillion yuan last year, easing from 2017's robust pace of 21 per cent, the National Bureau of Statistics said yesterday.

Last year's profit gain mostly came from the oil and natural gas extraction industry, along with the ferrous metal and chemical sectors, statistics bureau official He Ping said in a statement along with the data release.

Activity at 2,500 Chinese small and medium-sized enterprises continued to contract in the fourth quarter last year despite a flurry of supportive government policies, a survey from the state planner showed this month.

The Small and Medium Enterprises Development Index stood at 93 last quarter, below the 100-mark that separates growth from contraction, according to the National Development and Reform Commission.

Though traders are replenishing inventory ahead of the Chinese New Year holiday early next month, demand remains weak. Aggravating the slowdown, the government has also vowed it will not relent on enforcing anti-pollution controls.

Beijing has promised to increase spending on infrastructure projects this year and boost consumption in areas such as automobile and home appliances.

China's producer prices rose at their slowest pace in more than two years last month. New orders - an indicator of future activity - contracted for the first time in at least a year last month.

Profits at China's state-owned industrial firms rose 12.6 per cent last year from a year earlier, slowing from a 16.1 per cent increase in the January-November period.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 29, 2019, with the headline 'China industrial profits shrink again in December'. Print Edition | Subscribe