China domestic demand cools

Profit growth at China’s industrial firms slowed for the fifth consecutive month in September as sales of raw materials and manufactured goods further ebbed, pointing to cooling domestic demand in the world’s second-biggest economy.

The slowdown was in line with data last week that showed September’s factory output grew at the weakest pace since February 2016.

Slowing corporate profits will put pressure on jobs, ultimately tapping the brakes on household consumption and hurting China’s overall growth.

Industrial profits rose 4.1% in September from a year earlier to 545.5bn yuan ($78.57bn), the National Statistics Bureau (NBS) said on Saturday. That was less than half the pace in August, and the slowest since March. Earnings in September were mainly pressured by a greater slowdown in production and sales, declining price growth, and a high statistical base a year earlier, He Ping of the statistics bureau said.

An escalating trade war with the US has also added to the pressure on overall output, and threatens to chill business investments and earnings growth in the months ahead.

Data last week showed the Chinese economy in the third quarter grew at the weakest pace since the global financial crisis as manufacturing output slowed. The manufacturing sector has also been squeezed by a reduction in sources of credit amid Beijing’s multi-year crackdown on corporate debt and risky lending practices.

While authorities are taking steps to ease pressure on firms with liquidity issues, many companies still face difficulty in obtaining funding. –