Factory Profits in China Sag to Two-Year Low, Show Figures From China’s National Bureau of Statistics

After recent reports about China’s economic growth slipping to the lowest in 24 years, reports about factory profits in China reaching a two-year low are now emerging. Leading news agency Reuters stated in a report on Tuesday that the 2014 factory profits reported by Chinese manufacturing facilities are showing growth rates that are the weakest in two years. With these new reports, the challenges faced by the Chinese economy are only underscored. China’s National Bureau of Statistics states that between 2013 and 2014, large industrial facilities in China registered a 3.3% increase in profits. This is the slowest since 2012 (November). The Bureau also stated that the country’s factory profits contracted by about 8%, which is the worst performance in about 12 months.

Speaking to reporters on the sidelines, a vice minister from the country’s Ministry of Industry and IT said that it would be a while before China overcame this slowdown. He said that China’s economy is entering a phase of ‘new normal’ where downward pressures on the industrial sector are more evident and impactful than ever before. Weak innovation capabilities are also hampering growth to a great extent, the minister added. The government of China has now revised its goal of growth in the industrial sector from 8.3% in 2014 to 8% in 2015.

As China’s economy fast approaches maturity, the definition of what is ‘normal’ from the economic context is now undergoing a sea change. Officials said that the government is now focused on facing this transition with growth rates that are slower, but offer better quality. 

Financial institutions and banks are feeling the heat of the slowdown, as the ration of bad debts of Chinese banks scaling a five-year peak, according to the national bank regulator. The manufacturing market in China has been sagging for a while now, and the hectic pace of investments in China has been cooling off too. All of these factors have combined to rein in the economic growth of China’s economy to 7.4% as of 2014, which is the lowest since 1990 – the year that marked heavy sanctions on China in the wake of the Tiananmen Square crackdown.