China: First annual industrial profit contraction since 1998 – Nomura

By FXStreet FXStreet (Delhi) – Research Team at Nomura, notes that China witnessed its first annual industrial profit contraction since 1998 which highlights the stress on the industrial sector and the whole economy.

Key Quotes

“Industrial profits growth fell again to -4.7% y-o-y in December after rising to -1.4% in November. For the whole year, profit growth slowed to -2.3% in 2015 from 3.3% in 2014; this marks the first year of negative growth since 1998.

Profit growth in industries burdened by overcapacity painted a more worrisome picture. For example, profit growth in ferrous metal smelting and processing corporates dropped to about -67.9% 2015 from -2.7% in 2014. Similar situations were also seen in coal, oil and gas sectors.

The dwindling profit gains in these industries may soon turn into net losses. Thus, we believe the government will endeavour to reduce excess capacity in these industries this year.

We maintain our forecast for real GDP growth to slow to 5.8% in 2016 from 6.9% in 2015.”
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Source:: FX Street