Profits stumble

Chinese full- year industrial profits dropped by 2.3 percent last year, raising the risk of debt defaults amid a weaker outlook for economic growth. >

Chinese full- year industrial profit dropped by 2.3 percent last year, raising the risk of a rash of debt defaults amid a weaker economic growth outlook.

In December, the total profit of industrial companies fell by 4.7 percent from a year earlier, after undergoing a 1.4 percent year- on- year decline in November, according to data released by the National Bureau of Statistics on Tuesday.

The last time a full- year profit drop was recorded was 18 years ago, when annual profit plummeted by 17 percent amid the Asian financial crisis.

He Ping, a senior NBS economist, wrote on the bureau’s website that weak demand and long- term decline in factory- gate prices — what distributors pay producers for goods — dramatically decelerated industrial production and sales.

“High costs and tight cash flows also constrained industrial companies’ production,” he said.

Lian Ping, chief economist at the Bank of Communica- tions, said nonperforming bank loans to industrial companies are likely to quickly rise this year, as deflation continues and the government takes more steps to reduce overcapacity, particularly in unprofitable industries.

NBS data show that total profits of State- owned industrial companies fell by 21.9 percent year- on- year in 2015 to 1.09 trillion yuan ($ 165.7 bil- lion), while private companies gained 2.32 trillion yuan in profits, representing an increase of 3.7 percent.

Mining hit the strongest headwinds among industries last year, reporting a 58.2 percent decline in profit. Such declines were also concentrated in 11 other industries — including coal processing and steel — that struggle with serious overcapacity problems.