Chinese industrial profits suffer sharpest drop in a decade

Profits at large Chinese industrial companies kicked off the year on a wrong footing for the January and February period with the worst results recorded in almost a decade, data from the National Bureau of Statistics (NBS) showed on Wednesday.

Industrial profits for large Chinese firms fell by 14% year-on-year for the first two months of this year, making it the largest drop since May 2009. The decline is steep as manufacturing companies’ profits only fell by 1.9% in December.

Last year, the country recorded its slowest annual rate of increase in almost three decades, plagued by uncertainty from the US-Sino trade conflict, and a slowing economy.

For January and February, profits in the auto industry fell by a steep double-digit 42%.

Price declines in items such as auto, petroleum and slower factory output

In a separate statement, NBS said the timing of the Lunar New Year celebrations - which usually takes place on the first few months of every year where many factories and companies shut down for the holidays - had weighed on the headline profit.

NBS said the profit fall was partly due to price declines in the autos, petroleum processing, steel and chemicals industries and a result of slowing factory output and sales.

Factory activity worsened for last month, with the private and official purchasing managers’ indexes both in contractionary mode. Meanwhile, China's February exports came in worse-than-expected as it slid 20.7% year-on-year, following a surprise bumper reading in the previous month.

China has promised insertions of policy measures to prop up its economy, including the cutting of value-added tax rates while it deals with downward growth pressures.