Profit Growth at Chinese State-Owned Firms Drops to Single Digits

By Reuters
July 16, 2019 Updated: July 16, 2019

BEIJING—Profit growth at firms directly owned by China’s central government slowed to the low single digits in the second quarter, hit by a cooling economy and sputtering global trade.

Faltering earnings at state firms may complicate Beijing’s efforts to shore up the world’s second-biggest economy, which is growing at its weakest pace in nearly 30 years.

Overall profits grew 1.92 percent in April-June from a year earlier, sharply decelerating from a 13.1 percent gain in the first quarter, according to Reuters calculations based on first-half data released by the state assets regulator on July 16.

To bankroll tax cuts and support fiscal revenue, the government has said it will collect more profits from some state-owned financial institutions and centrally-owned firms.

In the first half of 2019, total profits at centrally-owned enterprises rose 6.7 percent to 947.05 billion yuan ($138 billion), the State-owned Assets Supervision and Administration Commission (SASAC) told a news conference.

That was markedly softer than January-June 2018, when profits increased 23 percent.

The profit gain in the first half of this year was still in a reasonable range and within expectations, said SASAC General Secretary Peng Huagang.

The slowdown was due to a large statistical base in the first half of 2018, Peng said, adding that earnings also eased this year because of fee cuts by state telecom firms and electricity suppliers.

Cooling global trade and domestic pressures also tapped the brakes on profit growth, Peng told reporters.

China reported on Monday that economic growth slowed to 6.2 percent in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting U.S. trade pressure.

By Lusha Zhang and Ryan Woo