February 3, 2020 / 2:01 AM / 22 days ago

China's industrial profits post first annual decline in four years

BEIJING (Reuters) - China’s industrial firms posted their first annual decline in profits in four years in 2019, as the slowest economic growth in almost 30 years and a bruising trade war with the United States hit the country’s factories.

FILE PHOTO: A worker welds a bicycle steel rim at a factory manufacturing sports equipment in Hangzhou, Zhejiang province, China September 2, 2019. China Daily via REUTERS

Official data released on Monday showed industrial profits declining 3.3% on an annual basis to 6.1996 trillion yuan ($897.96 billion) in 2019, compared with the 2.1% dip in the January-November period, the National Bureau of Statistics (NBS) said on its website. It was first full-year decline since 2015 when profits fell 2.3%.

The figures, however, predate the significant worsening of the coronavirus outbreak seen in January, which economists expect to seriously hurt economic growth in the first half of 2020.

The virus, which has killed over 300 people in China and infected over 17,000 patients in the past few weeks, could drag China’s economic growth to 5% or lower in the first quarter, analysts say.

China’s economic growth cooled to its weakest in nearly 30 years in 2019 amid its trade war with the United States.

Analysts expect Beijing to step up liquidity and credit support for the economy but such measures are unlikely to turn the economy around in the first quarter as the virus may further erode domestic demand.

For the month of December, profits fell 6.3% from a year earlier to 588.39 billion yuan ($85.22 billion), erasing the gain seen in November, the data showed.

The contraction in last year’s profits came mainly from slowing sales and increasing raw material and labour costs, said Zhu Hong, an official with the statistics bureau in a statement released alongside the data.

Profits in key industries like steel, petrochemicals and automobiles fell markedly, said Zhu.

For the whole of 2019, profits at state-owned industrial firms dropped 12.0%, while private-sector profits rose 2.2%.

Liabilities at industrial firms grew 5.4% year on year at end-2019, versus a 5.3% increase as of end-November.

Reporting by Roxanne Liu and Ryan Woo; Additional reporting by Gabriel Crossley; Editing by Sam Holmes

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