BEIJING, (Reuters) – Profits in China’s industrial companies grew slower than expected in December. Factory-gate inflation eased, pointing towards a cooling economy and rising economic difficulties.

Year-over-year profits rose by 4.2% to 734.2 billion Yuan ($115.89billion), the slowest pace since April 2020. This compares with November’s 9% gain.

The National Bureau of Statistics reported that industrial firms saw a 34.3% rise in profits for 2021 to 8.7 trillionyuan.

Zhu Hong (a senior NBS statistician) stated in a statement that “in 2021 the profits of industrial enterprise achieved relatively rapid growth with corporate efficiency steadily improving.”

Zhu explained that while growth rates declined significantly between November and December, and that downstream businesses, especially smaller ones, are still facing significant operational pressures, and the high number of losses-making companies is still an issue, Zhu acknowledged.

China’s factory-gate inflation, which was hot in China for months, cooled off for December. This is due to a crackdown by the government on commodity prices. Beijing tried to reduce the devastating economic consequences of rising costs.

In recent weeks, the People’s Bank of China introduced several monetary policies to help stabilize an economy that is in decline. Unexpectedly, it cut borrowing costs for medium-term loans by lowering benchmark lending rates.

The second-largest country in the world is struggling after a strong recovery from the pandemic. It faces many challenges going into 2022 due to slowing global exports, an increase in property prices and COVID-19 curbs which have impacted consumer spending.

China’s fourth quarter GDP grew by 4.0% compared to a year ago. This is its lowest expansion rate in just one-and-a half years.

This data includes industrial profits for large businesses with annual revenues exceeding 20,000,000 yuan.

($1 = 6.3354 )