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Industrial profits drop 4.2% in November
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CHINESE industrial profits dropped 4.2 percent in November to 676.12 billion yuan (US$108.55 billion), official data showed over the weekend, the biggest annual decline since August 2012 as the economy hit major unexpected headwinds in the second half.
Despite last month’s drop, profits for the January-November period were 5.3 percent higher than a year earlier, according to the National Bureau of Statistics data.
The bureau attributed November’s profit drop to declining sales and a long-running slide in producer pricing power.
“Increasing price falls shrank the space for profit,” the bureau said.
It said the impact of prices for coal, oil and basic materials falling to their lowest levels in years “was extremely clear.”
As the bureau analysis suggested, the net slide in industrial profits was driven primarily by weakness in coal mining, and oil and gas industries, where November profits tumbled from a year earlier by 44.4 percent and 13.2 percent respectively.
Oil, coking coal and nuclear fuel processing industries reported their profits decrease by 34.2 percent, according to the data.
On the upside, Chinese technology industries saw profits grow sharply last month. Telecommunications firms saw a 20.7 percent increase, electronics and machinery expanded 15.1 percent and automakers gained 16.7 percent.
“This suggests that on the one hand, in the context of weak investment demand, stable consumption demand provided a certain degree of support; on the other hand, promoting industry restructuring is having a positive effect on efficiency,” the bureau’s analysis said.
However, the unbalanced nature of the performance highlights a quandary regulators face. They want to restructure the Chinese economy away from credit- and energy-intensive heavy industries toward lightweight technology products and services, yet they must also avoid causing a crisis in the financial system.
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