China economy

Profits slow at China’s industrial firms as nation’s economic growth ebbs

November gains of 14.9pc slowest since April, National Bureau of Statistics says

PUBLISHED : Wednesday, 27 December, 2017, 11:12am
UPDATED : Wednesday, 27 December, 2017, 4:27pm

Profits for China’s industrial firms rose at a sharply slower pace in November as demand and producer price gains eased in further confirmation of ebbing growth in the world’s second-largest economy.

Profits in November rose 14.9 per cent to 785.8 billion yuan (US$120.05 billion), the National Bureau of Statistics said on its website on Wednesday. It marked the slowest monthly growth rate since April’s 14 per cent.

Earnings were pressured in November by a slower pace of price rises compared to previous months, He Ping of the statistics bureau said in a statement along with the data release.

He cited November’s 5.8 per cent rise in producer prices, down from 6.9 per cent in October, noting that it was the biggest month-to-month slowdown in factory inflation this year.

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More than half of the increase in profits in January to November came from coal mining and washing, iron and steel smelting and processing, chemicals, and oil and natural gas extraction, He said.

While the industrial sector has enjoyed a year-long construction boom that has fuelled demand and prices for building materials in a boost to growth, a government-led battle to clean toxic air and a crackdown on financial risks have started to drag on China’s economy.

Chinese steelmakers in 28 cities have been ordered to curb output between mid-November and mid-March. A campaign to promote clean energy by converting coal to natural gas has also hampered manufacturing activity in northern cities due to insufficient supply and high prices.

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Chinese iron ore and coke futures stretched losses on Tuesday as steel prices fell further, weighed down by the seasonal weakness in demand in the world’s top producer during winter.

For the first 11 months of the year, profits reached 6.875 trillion yuan, up 21.9 per cent from the same period of 2016, though the rate of expansion was slower than the 23.3 per cent reported for the January to October period.

Mining industry profits rose 286.8 per cent from a year earlier in January to November while manufacturing profits were up 18.9 per cent, both slowing from January to October.

Profits earned by China’s state-owned firms increased 46.2 per cent to 1.576 trillion yuan in the first 11 months, cooling from a 48.7 per cent surge in January to October.

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China has defied market expectations with 6.9 per cent growth in the first nine months of the year amid the construction boom and solid exports. A slowdown has started to take hold in the past few months as the property sector cools and credit growth ebbs, with Beijing focused on controlling corporate leverage.

At the end of November, industrial firms’ liabilities were 6.3 per cent higher than a year earlier, compared with a 6.7 per cent increase at the end of October.