A China industirial site
Profits at China’s industrial enterprises shrank 5.3 per cent in September from a year earlier, marking the deepest fall in four years, according to data from the National Bureau of Statistics on Sunday.
The fall of profits in September marked an acceleration from the drop of 2 per cent in August and was the biggest decline since August 2015, showing trouble for the world’s second biggest economy as the trade war with the US took its toll on China’s economic activity.
In the first nine months, combined profits made by Chinese industrial enterprises fell 2.1 per cent from the same period last year, the statistics agency said.
Among them, profits at state-owned enterprises fell 9.6 per cent while private business profits rose 5.4 per cent. Profits at industrial enterprises funded by foreign funds and Hong Kong investors fell 4.2 per cent.
In a breakdown of sectors, profits in petroleum, coal and other fuel processing shrank 53.5 per cent in the first nine months of this year compared to a year ago, while profits in the ferrous metal processing industry dropped 41.8 per cent.
Car manufacturing profits dropped 16.6 per cent, and profits in the textile industry fell 4.3 per cent, according to NBS.
Manufacturing profits fell 3.9 per cent in the first three quarters. The statistics agency did not provide a detailed breakdown for the September profits figure.
The worsening industrial profitability is a sign that organic growth momentum is waning in China, despite the government’s efforts to bolster growth with targeted fiscal stimulus.
China’s gross domestic product growth slowed to 6 per cent year-on-year in the third quarter, decelerating from the previous quarter’s 6.2 per cent and touching the lower end of the government’s target for this year.
The statistics agency said the fall in profits in September “was due to a faster decline in industrial product prices and a slower growth in sales”.
China’s producer price index sank to a minus 1.2 per cent in September, highlighting weak domestic demand. Exports were down 3 per cent with imports slowing even more, as manufacturers continued to face pressure, with the trade war with the US now in its 15th month.
Hopes are rising that a trade war deal will be ready for President Xi Jinping and US President Donald Trump to sign on the sidelines of the Asia-Pacific Economic Cooperation summit in Chile next month.
In the past week, Beijing has promised to buy US$40 billion to US$50 billion worth of US farm produce – partly in return for Washington suspending a tariff increase originally planned for October 15 – and further open its financial markets.
However, it is still facing the prospect of the US imposing a new 15 per cent tariff on about US$160 billion worth of its goods on December 15.