China’s industrial profit decline widens in August

According to data released by the NBS on Monday, profits fell by 8.8%, 156.6 billion yuan, in the 12 months to August – a significantly steeper decline than the 2.9% contraction seen in July. The biggest drops were concentrated in producers of coal, oil and metals.

It said firms were squeezed by rising costs and falling prices, with profits falling more quickly in August than in July.

A plunge in China’s stock market over the summer and a surprise devaluation in the yuan have upset global markets, and raised doubts inside and outside China about Beijing’s ability to manage its economy.

During the first eight months, industrial profits of the firms dropped 1.9 per cent year on year to around 3.77 trillion yuan.

“Companies are facing enormous operational pressures”, said Liu Xuezhi, a macroeconomic analyst at Bank of Communications Co.in Shanghai. “The momentum of growth is weak, and the downward pressure on the economy is relatively large”.

The Shanghai Composite Index retreated 0.2 percent to 3,086.34 as of 11:30 a.m. local time.

The statistics bureau also noted that some export-oriented enterprises suffered foreign exchange losses as a result of yuan’s depreciation in August, which contributed to increased financial costs.