BEIJING: China’s industrial firms posted their worst slump in profits since late 2011 in the first two months of this year, data showed on Wednesday, as increasing strains on the economy in the face of slowing demand at home and abroad took a toll on businesses.
The sharp decline in profits suggests further trouble for the world’s second largest economy, which expanded at its slowest pace in almost three decades last year. The government has already lowered the economic growth target this year to 6.0-6.5 per cent, from the actual rate of 6.6 per cent in 2018.
Profits notched up by China’s industrial firms in January-February slumped 14.0 per cent year-on-year to 708.01 billion yuan ($105.50 billion), the National Bureau of Statistics (NBS) said on its website on Wednesday. It marked the biggest contraction since Reuters began keeping records in October 2011.
The data combines figures for January and February to smooth out distortions caused by the week-long China’s Lunar New Year.
The drag was mainly due to price contractions in key industrial sectors such as auto, oil processing, steel and chemical industries, Zhu Hong of the statistics bureau said in a statement accompanying the data, adding that production and sales are slowing as well. Profits in the auto sector were down 37.1 billion yuan from a year earlier, while those in the oil processing industry fell 31.7 billion yuan, according to official data.
Zhu said the timing of Lunar New Year holidays that fell in early February also had a bigger negative impact on business operations this year than in 2018.
The trade war with the United States has put a dent on factory activity, corporate earnings, business sentiment and overall consumption in a blow to the economic outlook.
Growth in China’s manufacturing output slumped to a 17-year low in January-February, while factory-gate inflation remained subdued in the same period in a reflection of the deepening strains across the economy. — Reuters
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