China’s businesses are starting to feel a squeeze on profits as financing channels remain dry and threats of a US trade war still linger, Reuters reports.
China Inc. recorded net profit growth of just 3.9% in the third quarter of 2018, down from consistent annual increases of between 20% and 55% in each quarter for the past two years, according to analysis by Reuters of almost 2,000 publicly traded firms.
Cheap borrowing had been a reliable contributor to growth for Chinese companies in recent years, but many firms have been caught short since Beijing launched a deleveraging campaign to cut down levels of financial risk earlier this year.
Total debt held by Chinese companies fell by 1.6% year-on-year to Rmb 12 trillion ($1.7 trillion) last quarter, marking the first decline since Reuters started conducting the study nine years ago.
On top of tighter financing and poor market sentiment, the firms surveyed listed poor investment returns, downward pressure on prices and increased competition as factors weighing on profits.