Fri, Dec 28, 2018 - Page 10 News List

China industrial earnings see first drop since 2015

CHALLENGING YEAR?As authorities roll out measures to support firms through the coming months, an analyst said indicators all point at a further decline next year

Reuters

Earnings at China’s industrial firms last month dropped for the first time in nearly three years as slackening external and domestic demand left businesses facing more strain next year in a sign of rising risks to the world’s second-largest economy.

The gloomy data points to a further loss of economic momentum as the trade dispute with the US piles pressure on China’s vast manufacturing sector and as firms, bracing for a tough year ahead, shelve their investment plans, executives said.

Industrial profits fell 1.8 percent from November last year to 594.8 billion yuan (US$86.65 billion), the Chinese National Bureau of Statistics said on its Web site.

It marked the first decline since December 2015.

The fall in profits largely reflected slowing growth in sales and producer prices, as well as rising costs, He Ping (何平), a director at the bureau said in a statement accompanying the data.

Economists expect earnings to continue to worsen next year, weighed down by smaller gains in industrial prices due to cooling demand, with some even warning of the risk of deflation.

“Soft economic indicators, such as producer prices, industrial output and orders, all point to further pressure on corporate profitability,” said Nie Wen (聶文), a Shanghai-

based analyst at Hwabao Trust, adding that firms’ revenues have been hit by shrinking demand.

“Industrial profits next year might very well post a 5 to 10 percent decline on average,” Nie said.

In November, China’s factory price growth slowed to the weakest pace in two years as domestic demand lost further momentum.

“Survival is paramount for us [next year] — we will be more cautious with our investments,” said Jiang Ming (姜明), chairman of Henan-based Tianming Group (天明集團), which has businesses in healthcare, construction and finance. “We also need to maintain better cashflow and save our ammunition to prepare for the tight, tough and difficult days ahead.”

The Chinese economy last quarter expanded at the slowest pace since the global financial crisis, hit by a years-long deleveraging campaign, a cooling property market and a trade dispute with the US, and is expected to cool further next year.

The growing pressure has prompted the Beiing to roll out a range of measures to juice up demand.

At a key annual economic conference held this month, China’s top leaders said that they would ratchet up support for the economy next year by cutting taxes and keeping liquidity ample, while promising to push forward trade negotiations with the US.

At the beginning of the month, US President Donald Trump and Chinese President Xi Jinping (習近平) agreed to a 90-day truce, delaying a planned US tariff hike on Jan. 1 as they negotiate a trade deal.

However, there is uncertainty about whether the two sides could bridge their differences over a myriad of issues — including trade and intellectual property rights — to reach a durable pact.

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