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China's March industrial profit growth slows sharply to over one-year low

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Reuters BEIJING
BEIJING (Reuters) - Profits at Chinese industrial firms rose 3.1 percent year-on-year in March, slowing significantly from the pace of the first two months of the year and adding to signs of cooling growth in the world's second largest economy.
Profit growth last month declined from 23.8 percent in the same period last year, the slowest since December 2016, official data showed on Friday. Earnings were up 16.1 percent over the first two months of the year.
The weak profits were due to a later Lunar New Year holiday this year, softer producer price inflation, and higher financing costs due to currency conversion losses, He Ping of the National Bureau of Statistics (NBS) said in a statement accompanying the data.
After posting their strongest growth in six years last year, profit growth at China's industrial firms have slowed this year as a boom in commodity prices has started to fade, albeit very gradually.
Profits in March rose to 589.75 billion yuan, the statistics bureau said on its website.
Taken together, profits in the first three months of the year reached 1.55 trillion yuan, up 11.6 percent from the same period last year. That is still solid growth but a significant slowdown from the 28.3 percent pace in the same period last year.
China's economy expanded 6.8 percent year-on-year in the first quarter, matching the pace of the previous quarter, but analysts say slowing March industrial and investment growth suggest momentum in the economy is tapering off.
Weaker profit growth for China's vast industrial sector, which range from mining companies to high-tech manufacturers, presents some risks especially because state-owned firms are heavily indebted and account for the bulk of the country's high leverage.
Industrial firms benefited from Beijing's campaign to shut down outdated production capacity and a strong housing market, which has in the past year stimulated demand for goods ranging from steel to home appliances.
Both factors had by late 2016 helped reverse years of producer price deflation, and a strengthening industrial sector helped improve the balance sheets of heavily indebted firms.
But factory inflation has fallen for five months now, hitting a 17-month low in March, and analysts don't expect a bounce in the near-term.
Liabilities of industrial firms rose 5.8 percent year-on-year as of end-March, according to the statistics bureau.
Profits at China's state-owned firms rose 23.1 percent to 476.3 billion yuan for Jan-March, compared with a 29.6 percent rise in the first two months.
The data includes companies with annual revenues of more than 20 million yuan from their main operations.
(Beijing Monitoring Desk and Elias Glenn; Editing by Shri Navaratnam)

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First Published: Apr 27 2018 | 8:36 AM IST

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