Chinese industrial companies’ profits declined the most in at least three years last month, underscoring the challenge facing the nation’s former growth drivers as the economy slows and commodity prices slump.
Industrial profits fell 8 percent last month from a year earlier, the Chinese National Bureau of Statistics said in Beijing yesterday, the biggest drop since at least October 2011, according to data compiled by Bloomberg. China will strive for 8 percent growth in industrial output this year, an official said at a briefing, according to a transcript on a government Web site.
China’s old growth drivers are faltering, weighed by overcapacity and a property downturn. Services companies are faring better, bolstering an economy that last year expanded at the slowest pace in 24 years.
“The upstream industries, from mining to oil exploration, are hurting badly from falling input prices, while some manufacturers are benefiting,” said Ding Shuang (丁爽), a senior China economist with Citigroup Inc in Hong Kong. “A deeper fall in industrial profits will damp investment activity to weigh on future growth.”
Profits in coal mining plunged 46.2 percent last year, while the oil processing and nuclear fuel industry’s returns shrank 79.2 percent, the bureau said. Profits in automaking rose 18.1 percent and in electronics manufacturing they increased 17.1 percent.
The fall in raw material supply profitability and the rise in consumer product manufacturing profitability showed China’s “growth is shifting from an investment-driven model to a consumption-led one,” the bureau said in a statement.
A manufacturing gauge recovered lost ground this month, suggesting stimulus measures have helped stabilize the world’s second-largest economy. The preliminary Purchasing Managers’ Index from HSBC Holdings PLC and Markit Ltd was at 49.8, exceeding the median estimate of 49.5 in a Bloomberg survey and up from last month’s 49.6, a report on Friday last week showed. Numbers below 50 indicate contraction.
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