China’s industrial profits slump in October as price war deepens
Beijing to crack down on ‘disorderly’ market practices amid rising financial costs, while analysts point to excess capacity eating into corporate margins
China’s industrial profits dropped in October after a strong September, according to official year-on-year data released on Thursday, and analysts are pointing to domestic competition and trade tensions weighing on corporate balance sheets.
For the January-October period, profits earned by Chinese companies of a certain scale rose by 1.9 per cent, slower than the 3.2 per cent growth in the first nine months, the bureau said.
Profits among manufacturers grew by 7.7 per cent from January through October, while earnings for electricity, heat, gas and water providers expanded by 9.5 per cent. Meanwhile, mining profits saw a year-on-year decline of 27.8 per cent.
The profit setbacks last month were partly due to a high base effect and rapid growth in financial expenses, the bureau said.
A cyclical pause in Chinese holiday spending spikes combined with an expected slowdown of spending in the US – still a major Chinese export market despite the trade war – could have also chilled profits in October, said Charles Chang, a finance professor at Fudan University in Shanghai.
Chen Zhiwu, chair professor of finance at the University of Hong Kong, said that excess production capacity and cutthroat domestic price competition likely contributed to the fall in profits last month.
On Monday, a price-monitoring department under the National Development and Reform Commission stated at a symposium that “disorderly price competition remains a prominent problem in some industries”, with enterprises not always complying with requirements to regulate it.