China's
November industrial profits suffer sharpest fall in 27
months
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[December 27, 2014]
By Pete Sweeney
SHANGHAI (Reuters) - Chinese industrial
profits dropped 4.2 percent in November to 676.12 billion yuan ($108.85
billion), official data showed on Saturday, the biggest annual decline
since August 2012 as the economy hit major unexpected headwinds in the
second half.
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Despite last month's drop, profits for January-November were 5.3
percent higher than in the first 11 months of 2013, according to the
National Bureau of Statistics (NBS) data.
The NBS attributed November's profit drop to declining sales and a
long-running slide in producer pricing power.
"Increasing price falls shrank the space for profit," the agency
said.
It said the impact of prices for coal, oil and basic materials
falling to their lowest levels in years "was extremely clear".
As the NBS analysis suggested, the net slide in industrial profits
was driven primarily by weakness in coal mining, and oil and gas
industries, where November profits tumbled from a year earlier by
44.4 percent and 13.2 percent respectively.
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UPSIDE FOR TECH BUSINESSES
Oil, coking coal and nuclear fuel processing industries saw their
profits slide by 34.2 percent, according to the data.
On the upside, Chinese technology industries saw profits grow
sharply last month. Telecommunications firms saw a 20.7 percent
increase, electronics and machinery grew 15.1 percent and automobile
manufacturers enjoyed a 16.7 percent gain.
"This suggests that on the one hand, in the context of weak
investment demand, stable consumption demand provided a certain
degree of support; on the other hand, promoting industry
restructuring is having a positive effect on efficiency," the NBS
analysis said.
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However, the unbalanced nature of the performance highlights a
quandary regulators face. They want to restructure the Chinese
economy away from credit- and energy-intensive heavy industries
toward lightweight technology products and services, yet they must
also avoid causing a crisis in the financial system.
If Beijing allows mass closures among its sagging erstwhile
industrial champions in the name of economic transformation, it also
risks forcing a wave of bad loans onto bank balance sheets. That
would make banks even more reluctant to lend to the next-generation
companies which authorities want them to support.
Economists are debating whether the monetary easing steps taken in
recent months - including late November's surprise interest rate cut
- can prove effective in a context where many companies are seeking
fresh capital primarily to roll over existing debt amid weak
customer demand, while China's most successful firms remain
reluctant to borrow.
(Reporting by Pete Sweeney; Editing by Richard Borsuk)
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