Profit growth for major industrials continues slide

Source: Xinhua | 2018-12-28

Profits of China’s major industrial firms grew 11.8 percent year on year in the first 11 months this year, down from the 13.6 percent expansion recorded during the first 10 months, the National Bureau of Statistics said yesterday.

In November, combined profits at industrial firms with annual revenue of more than 20 million yuan (US$2.89 million) fell 1.8 percent year on year to 594.75 billion yuan, compared with the increase of 3.6 percent recorded in October.

“The decline is mainly because of slower increase in the sector’s output and sales, drops in the rise of factory gate prices of industrial products and higher costs,” National Bureau of Statistics analyst He Ping said in a statement.

Profits in 34 of the 41 industrial sectors surveyed posted increases from a year ago, the NBS said, including upstream sectors such as oil extraction, coal and metal mining.

The Central Economic Work Conference which wrapped up last week in Beijing has pledged to offer deeper tax cuts and more government spending as the government aims to revitalize the economy in the wake of uncertainties brought about by the trade dispute between China and the United States.

From April to October, the growth of industrial profits has also been on the decline, dropping to 3.6 percent in October from 21.9 percent in April.

Pingan Securities wrote in a research note yesterday that profitability improvement in the long term would require more tax cuts and measures to boost performance.

December’s industrial profit growth is likely to post a further decline due to cost and profitability factors, and Pingan estimates a slowing to 10 percent year on year for full-year 2018.

Nomura Securities also expects the downward trend in industrial profit growth to extend into 2019, given weakening domestic demand, the continued credit downcycle and an escalation in the China-US trade conflict.