Chinese industrial companies’ profits dropped for a fifth month in August, a government report showed, adding to signs the nation’s economic slowdown is extending into a seventh quarter.
Net income fell 6.2 percent from a year earlier to 381.2 billion yuan ($60.4 billion), the National Bureau of Statistics said today in Beijing. That compares with a 5.4 percent decline in July and a 1.7 percent slide in June.
Thursday’s report may increase pressure on Premier Wen Jiabao to step up easing measures as risks grow that annual expansion in the world’s second-biggest economy will be the weakest in 22 years. Producer-price declines accelerated for a fifth month in August and the China Beige Book, a private survey, said more companies are cutting jobs and wages this quarter.
“Profits are expected to continue to fall as there is a considerable build-up of excess capacity in the economy, and businesses have very little pricing power and in some cases are looking to unload inventory,” Patrick Bennett, a senior strategist at Canadian Imperial Bank of Commerce in Hong Kong, said before the release.
The economic slowdown may persist into next year on a lack of funding for investment projects, Song Guoqing, a central bank adviser, said last week.
Earnings are declining amid falling prices, higher costs and slower demand. More small companies are halting all or half of their production due to narrowing profit margins, Miao Wei, minister of industry and information technology, said in remarks posted on the agency’s website on Sept. 24.
Industrial companies’ profits in the first eight months of the year declined 3.1 percent to 3.06 trillion yuan, according to today’s statement. That compares with a 2.7 percent drop in the first seven months and a 28.2 percent gain in the same period in 2011.
Revenue for the companies in the first eight months increased 10.2 percent from a year earlier to 57.6 trillion yuan.
(Bloomberg)
