Earnings growth for China’s industrial firms cooled in July after accelerating for three straight months, reinforcing expectations the economy will slow over coming quarters as higher lending costs and property market curbs bite. Profits earned by China’s industrial companies in July rose 16.5 percent from a year earlier to 612.7 billion yuan, slower than the previous month, the statistics bureau said on Sunday. That was the slowest rate of growth since profits rose 14.0 percent in April.
Profit growth slowed in July because some companies halted production due to especially high temperatures, He Ping of the National Bureau of Statistics bureau said in a statement along with the data release. For the first seven months of the year, the firms notched up profits of 4.25 trillion yuan, a 21.2 percent jump from the same period last year and a touch slower than the 22.0 percent annual growth in the January-June period.
Earnings for the industrial sector were boosted by a year-long, government-led construction spree, which fuelled demand and prices for building materials. Government efforts to shut older, heavily polluting mines and factories have given commodity prices fresh impetus in recent weeks.
Analysts say economic growth will slow eventually as measures to cool heated property prices and clamp down on riskier forms of lending put the brakes on activity. Beijing’s efforts to reduce debt have pushed up lending rates, signaling tighter margins and tougher operating conditions for firms as debt servicing costs go up – a sign of slowing earnings growth over coming months.