Industrial profits dive in December

Overcapacity, deflation hit factories; fortunes of State enterprises, private sector diverge

Excess capacity and the deflationary forces associated with plunging crude oil prices devastated manufacturers' profits last month, with a year-on-year plunge of 8 percent, the National Bureau of Statistics said on Tuesday.

The decline was the largest since at least October 2011, when the current data series began.

The pace of contraction accelerated throughout the fourth quarter, with falls of 2.1 percent in October and 4.2 percent in November.

Full-year profits edged up 3.3 percent to 6.47 trillion yuan ($1.04 trillion), the NBS reported.

Profits of State-owned enterprises fell 5.7 percent last year, while those of private companies rose 4.9 percent.

All companies in the NBS survey have annual revenues exceeding 20 million yuan.

Out of 41 industries, 11 recorded lower profits. The declines were especially steep in the energy sector: oil refining and nuclear fuel processing enterprises' profits fell 79.2 percent, while profits in the coal mining and washing industry declined 46.2 percent.

Sharp drops in factory-gate prices and raw materials costs drove profits down, said He Ping, an economist at the NBS. The oil and coal industries accounted for about 80 percent of the entire industrial sector's profit decline, said He.

"But profits of consumer goods manufacturers increased 5 percent, indicating that the impetus for growth is shifting to consumption and away from the traditional investment," he added.

Fast-rising production costs also crimped profits, experts said.