Profits fell at Chinese industrial companies for the first time in nearly three years last month, in the latest sign that businesses are feeling the impact of weakening domestic demand and the anticipated hit from US tariffs.
Chinese policymakers last week announced their intention to enact fresh fiscal and monetary stimulus measures, in a bid to mitigate against a weakening economy and the threat by Donald Trump to raise levies on $200bn worth of goods to 25 per cent in January.
Thursday’s data showed industrial profits declined 1.8 per cent in November from a year earlier, the first negative reading since December 2015 and a steep fall from 3.6 per cent growth in October. Goldman Sachs estimated that profits fell even more sharply on a seasonally adjusted basis, down from 7.2 per cent from October.
Analysts said that the slowdown partly reflected businesses pulling back on investment in anticipation of the new tariffs and weaker domestic and external demand. “We have already witnessed a sharp pullback of upstream manufacturing capex,” Charles Yue Yuan, an economist at China International Capital Corporation, wrote on Thursday.
He added that slower credit growth resulting from China’s debt-cutting campaign has caused low inflation, leading to weak nominal profit growth at industrial groups. “This trend (of slow credit growth), if left unadjusted, will probably result in further deterioration of corporate profitability and economic fundamentals,” Mr Yuan wrote.
The release of the official data came as China’s internet regulator announced tighter controls on financial information providers who, they regulator warned, could disrupt market stability by publishing sensitive material.
The government has already tightened censorship of negative economic information from news outlets, think-tanks and sellside research analysts. The latest rules from the Cyberspace Administration of China target financial information and database providers, consultancies and stock exchanges.
“Some institutions fail to check information strictly, hype up financial risk, publish sensitive market information, distort financial regulatory policy, and seriously affect economic and financial stability, requiring urgent disciplinary action,” the agency said in a statement.
While China’s propaganda authorities have long maintained strict control of print, broadcast and online news media, financial information and database providers have operated in a regulatory grey zone.
Domestic financial terminal providers such as Wind and Choice compete with Bloomberg and Thomson Reuters. Some effectively publish news but are not regulated as news organisations. The new rules state that any institution publishing news should obtain a licence.
Authorities have appeared increasingly sensitive to negative economic information and rumours. Last week, China’s top financial regulatory body issued an unusual one-line statement denying rumours that China’s annual economic policy planning meeting — scheduled to conclude later that day — would not announce new tax cuts.
The national statistics agency this month forced Guangdong province, the southern export hub, to stop publishing its monthly purchasing managers’ index, a closely watched gauge of manufacturing activity and sentiment.
The Financial Times reported in November that propaganda authorities had extended censorship controls traditionally reserved for political news to encompass economic reporting.
Also last month, the chief securities regulator instructed a meeting of chief economists from top securities brokerages that they should support Communist party policies and “contribute positive energy to guiding market expectations”, according to the state-controlled Securities Association of China.
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