China’s Industrial Profits Continued to Shrink in December

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The profits of Chinese industrial companies fell for the second straight month as both factory inflation and economic growth slowed.

• Manufacturing companies’ profits declined 1.9 percent last month from a year earlier, the National Bureau of Statistics said in a statement

Key Insights

• China’s manufacturing companies are under pressure with output growth at the lowest pace in a decade, and factory-gate inflation slowing
• The data may understate the actual pain being felt by private industrial companies, according to Chang Shu at Bloomberg Economics in Hong Kong. That presents a further challenge to the growth outlook, she wrote.
• The debt-to-asset ratio of industrial enterprises dropped 0.5 percentage point to 56.5 percent by the end of 2018 from the previous year, and that of state-owned enterprises declined by 1.6 percentage points to 58.7 percent, the NBS said in a separate statement
• Oil and gas mining was the most profitable sector in 2018 with profits more than quadrupling, followed by nonmetallic minerals products, ferrous metal smelting, chemical products manufacturing and alcohol and beverage sectors
• Tobacco, paper-making, auto manufacturing, non-ferrous smelting, computer and telecommunication equipment production have seen profits fall last year
• The official year-on-year growth rate for profits began diverging from the growth rate calculated from the nominal profit figures in 2017, and continued to be higher in December’s release. That discrepancy has led some economists to question the veracity of the figures

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• Profits climbed 10.3 percent for the full year 2018 to 6.6 trillion yuan ($980 billion), about half the pace of the previous year
• Even though the economy is slowing, Chinese output still expanded by about the size of Australia’s gross domestic product in 2018

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net;Miao Han in Beijing at mhan22@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger

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With assistance from Bloomberg