China’s industrial profits growth slows

Slowing corporate profits likely to put pressure on jobs

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 secondbiggest 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 per cent in September from a year earlier to 545.5 billion yuan (Dh288 billion), the National Statistics Bureau (NBS) said yesterday. That was less than half of 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, as well as a high statistical base a year earlier, He Ping of the statistics bureau said in a statement accompanying the data.

The manufacturing sector has 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. Interest rates on loans have also risen due to the reduced supply of credit. A cooling property market — an engine of economic growth — has also sapped demand for construction-related goods and services, curbing industrial profits.

Softer infrastructure investment despite Beijing approving more projects in the second half this year has also added pressure on the bottom-lines of industrial firms.

In the first nine months of the year, industrial profits increased 14.7 per cent, driven by earnings of companies producing steel, building materials, oil and petrochemicals.

But the growth slowed from the 16.2 per cent pace seen in January-August.