Business / Industries

Industrial profits slide in October

By Chen Jia (China Daily) Updated: 2014-11-28 07:47

Industrial profits slide in October

An employee putting finishing touches to steel products for export at a workshop in Lianyungang, Jiangsu province. State-owned industrial enterprises' profit fell 1.2 percent year-on-year from January to October, while the profits of private companies rose 8.7 percent. [Si Wei / China Daily]

Industrial companies' profits fell 2.1 percent year-on-year in October, the steepest decline since September 2012, the National Bureau of Statistics announced on Thursday.

Analysts said the figure suggests that the economy is continuing to slow in the current quarter.

The October figure was the second profit decline this year, the first being a fall of 0.6 percent in August. Profits rose 0.4 percent in September.

During the first 10 months, total industrial profits reached 4.94 trillion yuan ($804 billion), up 6.7 percent year-on-year but still a slowdown from the 7.9 percent increase for January to September.

State-owned industrial enterprises' profit fell 1.2 percent from January to October, while the profits of private companies rose 8.7 percent.

The NBS said that eight of the 41 industries covered in the data saw profits decline in the first 10 months. Among those were the coal mining and processing industry, as well as oil and natural gas extraction industry. The sluggish figures reflect cooling domestic demand amid a sluggish construction sector and weak manufacturing investment, economists said.

Major new infrastructure projects and policy support for the property sector will offer a partial but not full counterbalance, which means that growth will slow further, said Wang Tao, chief economist in China at UBS AG.

She said: "As deflationary pressures mount in China's industrial sector, real interest rates will rise higher. We expect an additional 40 to 50 basis points of benchmark lending rate cuts in 2015, which should help lower financing costs and slow the pace of nonperforming loans".

The NBS will announce the November manufacturing Purchasing Managers Index on Monday. Economists forecast a decline to about 50.5 from 50.8 in October and 51.1 in September.

The HSBC Holdings Plc flash manufacturing PMI eased to a six-month low of 50 in November, led by a decline in the output subindex to a seven-month low of 49.5.

Gary Lau, an analyst at Moody's Investors Service, said on Wednesday there are signs that Asian steel-makers' profitability has bottomed out and will increase slightly in 2015 as capacity growth slows and utilization rates rise.

"Steel demand and capacity growth in China will drive the growth," he said. "Leading Chinese producers will show modest profitability improvement and gain market share at the expense of their smaller domestic peers as the government moves to reduce inefficient capacity."

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