Chinese industrial companies’ profit growth fell last month, a government report showed yesterday, as the nation’s slowing economy curbed demand.
Earnings declined 2.2 percent from a year earlier to 407.6 billion yuan (US$64.2 billion), the National Bureau of Statistics said on its Web site. That compared with a 4.5 percent gain in March.
The deceleration in corporate profit growth underscores concerns that the slowdown in the world’s second-biggest economy is deepening. China’s State Council said on Wednesday that downside risks to growth are increasing and the government will intensify “fine-tuning” policies as needed, signaling it may take more aggressive steps to support the nation’s expansion.
“China’s economy is slowing down, so profit growth will also be slower this year,” Lu Zhengwei (魯政委), Shanghai-based chief economist at Industrial Bank Co, said before the release. “The pace may pick up a bit in coming months if the economy rebounds after policy easing filters through.”
Industrial profit growth for the full year is likely to be in a range of 10 percent to 20 percent, compared with 25.4 percent last year, Lu said.
China’s economy may expand 7.9 percent this quarter from a year earlier, the least since 2009, a Bloomberg survey this month showed, as Europe’s debt crisis crimps exports and property curbs cool domestic demand. That is down from an 8.1 percent pace in the first three months that was the fifth quarterly deceleration.
The government “must proactively take policies and measures to expand demand and to create a favorable policy environment for stable and relatively fast economic growth,” according to a government statement summarizing the State Council’s Wednesday meeting.
A preliminary reading of HSBC’s China purchasing managers’ index released on May 17 indicated manufacturing may contract for a seventh month, adding to signs that growth is weakening. The report followed data that showed industrial production last month rose the least since 2009 and new lending was the lowest this year.
Industrial profit for the first four months fell 1.6 percent from a year earlier to 1.45 trillion yuan, the statistics bureau report showed. That compared with a 1.3 percent drop in the first quarter. Sales in the period rose 12.7 percent to 27 trillion yuan, according to the data.
China’s industrial-profit data cover companies in 41 industries. Starting last year, the statistics bureau raised the minimum annual sales for businesses included in the survey to 20 million yuan from 5 million yuan.
Meanwhile, China will encourage greater private investment in banks as it seeks to fuel growth in an economy that’s losing steam and to aid small businesses that are short of funds.
Qualified companies can buy into lenders through private stock placements or new share subscriptions, equity transfers or mergers and acquisitions, according to guidelines released by the China Banking Regulatory Commission in a statement posted on its Web site on Saturday. The regulator also said it will encourage private investment in trust, financial leasing and auto-financing companies.
The rules aim to “encourage and guide private capital to enter the banking sector, and support financing in private investments,” according to the statement. The regulator also lowered the minimum shareholding of the main initiator for village banks to 15 percent from 20 percent.
China’s Securities Regulatory Commission said it would encourage private investment in securities firms and futures brokerages, and will modify rules to help privately owned companies raise capital.