China's industrial profits have fallen the most since late 2011

BEIJING (Reuters) – Profits from China's industrial enterprises have contracted the worst since the end of 2011 in the first two months of this year, according to data released on Wednesday, as rising tensions weigh on the economy. Economy in the face of slowing domestic and foreign demand have deteriorated on businesses.

The sharp drop in profits points to new problems for the world's second-largest economy, which experienced the slowest growth in three decades last year. The government has already lowered the goal of economic growth this year from 6.6% to 2018 between 6.0 and 6.5%.

China's industrial profits in January-February fell 14.0 percent year-on-year to 708.01 billion yuan (105.5 billion US dollars), the National Bureau of Statistics (NBS) said on Wednesday . This is the biggest contraction since the start of Reuters' records in October 2011.

The data combine the January and February figures to mitigate the distortions caused by the Chinese Lunar New Year, which lasts one week.

The drag was mainly due to the contraction in prices in key industrial sectors such as automotive, petroleum processing, steel and chemical industries, said Zhu Hong of the statistics bureau in a statement. accompanying the data.

Zhu said the lunar New Year holiday schedule, which fell in early February, also had a negative impact on business operations this year compared to 2018.

This slowdown was in line with the growth in industrial production between January and February, which fell to its lowest level in 17 years, reflecting weak domestic and external demand.

The trade war with the United States has had a negative impact on factory operations, corporate performance, business climate and overall consumption, to the detriment of the economic outlook.

Policymakers recognized that the country's economy was facing increasing downward pressure, penalized by multi-year campaigns to reduce debt risk and pollution, while the US trade war had adverse effects on export orders and employment.

Beijing is strengthening measures to support the manufacturing sector by reducing the value-added tax, increasing infrastructure spending and reducing direct government intervention.

However, support measures take a long time to materialize. Most badysts believe that economic activity might not stabilize convincingly before the middle of the year.

Earlier this month, Prime Minister Li Keqiang announced hundreds of billions of dollars in tax breaks and additional infrastructure, but officials promised not to resort to mbadive stimulus measures as in the past, which had resulted in considerable debt.