Industrial Profits in China Drops for 6 Straight Months, Negative Economic Downfall Alarms Producers

On November, records show that profits earned by Chinese industrial companies have decreased by over 1.4% from a year before. This now makes a sixth consecutive month for the decline in profits as showed on the statistics by the bureau of data on Sunday.

The National Bureau of Statistics (NBS) said on its website that the industrial profits, which cover large enterprises having an annual revenue of more than 20 million Yuan from their main operations fell 1.9% in the first 11 months of the year compared to last years data.

The data from November profits is already an improvement from the previous month. October profits plummet 4.6% from data gathered a year earlier.

Zhou Hao, China economist at Commerzbank in Singapore said, "The November industrial profit data matched earlier output data and they showed some signs of stabilizing, which are in line with recent data from other Asian countries."

The National Bureau of Statistics (NBS) said investment returns for industrial companies in November improved from a year earlier by 9.25 billion Yuan.

The auto manufacturing and electricity sectors show a 35% and 51% increase, respectively, in November profits as to last years data. The records helped in narrowing overall declines, the statistics bureau said.

He Ping, an official of the Industry Department at NBS said, "Declines in industrial profits narrowed in November, but uncertainties still exist," He added that inventory of finished goods grew at a faster pace last month.

Among major industrial firms, state-owned enterprises (SOEs) profits saw a 23% drop in the first 11 months this year from the same period in 2014. The mining industry also remained to be struggling with profits going down to 56.6% in the same period.

The producers of Aluminum China Hogqiao Group said in early December that it would cut annual capacity by 250,000 tons immediately to curb supplies and bounce back.

State-owned Jinchuan Group Co Ltd [JCGRP.UL] an Eight Chinese nickel producer said they would cut production by 15,000 tons of metal in December and reduce output next year by at least 20% from this year, in a bid to lift prices from their worst down fall in over 10 years.

An observation of China's producer prices being on a negative downfall for nearly four years now is due to weak domestic demand and overcapacity.

China's top leaders outlined main economic targets for next year after the held the yearly Central Economic Work Conference last week. The government will push forward with "supply-side reform" to help increase new growth engines the worlds second largest economy while tackling factory overcapacity and property inventories.

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