BEIJING (Reuters) – China's industrial companies surplus contracted for the second straight month in September as producer prices continued to push, highlighting the tolls for a slowing economy and protracted US trade wars have taken on the company's balance sheet.
People stand near a window overlooking the financial district in Shanghai, China October 23, 2019. Photo taken October 23, 2019. REUTERS / Stringer / File Photo
Industrial earnings fell 5.3% in September from the previous year to 575.6 billion yuan ($ 81.48 billion), data released by the National Bureau of Statistics (NBS) on Sunday showed. That compares with a 2% decline in August.
China's huge industrial sector has come under pressure amid trade tensions and high prices for the United States. The surplus has declined visibly since the second half of last year, although the sector has seen some recurring setbacks as Beijing is increasing its support measures.
The decline in earnings contrasts with the weak industry improvement in September, with factory surveys and better-than-expected industrial production growth pointing to an increase in domestic demand.
But factory door prices, which are considered a key barometer of corporate profitability, fell at the steepest cut in more than three years as economic growth hit a new near 30-year low in the third quarter.
In January-September, industrial companies made profits of 4.59 trillion yuan, down 2.1% from the previous year, and worse than 1.7% over the first eight months.
The decline was mainly due to factors such as a decline in factory price of industrial products and a decline in sales growth, said Zhu Hong, a senior statistician at NBS.
Profit for state-owned companies fell 9.6 percent in the first three quarters of the year.
The most affected sector was the oil, coal and other fuel processing industries, with profits falling 53.5 percent in the January-September period.
However, profits for the non-ferrous machinery, electrical machinery and equipment and alcoholic beverages sectors tended to increase earnings.
The U.S. and Chinese trade negotiators are working to nail down a "Phase 1" trade agreement that their presidents will sign next month, as the world's two largest economies try to end a more than a year-long trade war that has disrupted global trade.
China's economic growth is expected to slow to a near 30-year low of 6.2% this year and cool further to 5.9% by 2020, a Reuters poll showed, highlighting the challenges Beijing faces even though it increases the stimulus in the midst of bruising Chinese-American trade war.
Industrial business debt rose 5.4% year-on-year to 66.49 trillion yuan in late September, compared with a 5.0% increase in August.
The private sector surplus rose 5.4% in January-September, declining from 6.5% growth in the first eight months.
The data covers companies with more than 20 million yuan in annual revenue from the main business.
($ 1 = 7.0647 Chinese yuan yuan)
Reporting by Ben Blanchard and Jenny Su; Editing the Lincoln Feast