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.
Profits fell 5.5 per cent from a year ago, reversing a 21.6 per cent surge in September and a 20.4 per cent jump in August, according to figures from the National Bureau of Statistics.
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.
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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.
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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.