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China's July industrial profit growth cools for third straight month

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China's July industrial profit growth cools for third straight month
A worker looks on as a crane lifts a roll of steel wires at a factory in Nantong, Jiangsu province, China July 3, 2018. REUTERS/Stringer   -   Copyright  China Stringer Network(Reuters)
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BEIJING (Reuters) – Profit growth for China’s industrial firms cooled for a third straight month in July in a further indication that demand in the world’s second-biggest economy is cooling even as U.S. trade pressure mounts.

Industrial profits in July rose 16.2 percent from a year earlier to 515.12 billion yuan ($74.94 billion), slowing from a 20 percent increase in June, the National Bureau of Statistics (NBS) said on Monday.

Profit growth eased in July as producer price inflation moderates, He Ping of the statistics bureau said in a statement accompanying the data.

For the first seven months of the year, industrial firms have reported profits of 3.9 trillion yuan, up 17.1 percent from the same period last year.

The softer data came after a spate of weaker readings from the world’s second-largest economy in recent months. Investment growth has slowed to a record low and consumers are turn more cautious. Industrial output growth has also remained soft.

While rising raw material prices are benefiting producers such as steel mills and oil companies, they are adding to margin pressures for companies further down the manufacturing chain.

Business surveys show smaller manufacturers are struggling and are continuing to shed staff.

U.S. and Chinese officials ended two days of talks on Thursday with no major breakthrough as their trade war escalated with activation of another round of duelling tariffs on $16 billion worth of each country’s goods.

Earlier this month, Ning Jizhe, head of the Statistics Bureau, said China is confident and capable of meeting the full year’s economic goal of around 6.5 percent, according to a Xinhua report.

“We will take targeted measures to cope with impact on employment that might brought by trade frictions.” said Ning.

China is speeding up infrastructure spending and keeping liquidity reasonably ample to prop up growth, while ruling out a return to strong stimulus seen in the past which could add to high debt levels.

Officials have also said they will offer more help to companies which are struggling with high costs or having trouble obtaining financing.

Finance Minister Liu Kun told Reuters last week that taxes and fees will be cut by more than 1.1 trillion yuan this year.

China’s factory price inflation cooled in July amid a slowdown in economic growth, although economists expect punitive Chinese tariffs on U.S goods to add to wider price pressures in months ahead.

Meanwhile, China’s steel market is also enjoying a sustained boom as China continues its production restrictions to crack down pollution. Shanghai rebar steel futures rallied to a 7-year high last week.

Jiangsu Shagang <002075.SZ>, China’s biggest private-owned steel mill, reported a 242.3 percent increase in net profits for the first half this year, while Shougang in the capital city of Beijing <000959.SZ> saw net profits rise 50.1 percent.

The smog-prone province Hebei, which surrounds Beijing, is planning more rail and river freight to cut truck pollution. The province aims to improve port infrastructure and shift deliveries of iron ore to steel mills to rail.

Profits earned China’s state-owned industrial firms increased 30.5 percent year-on-year in January-July period, slowing from a 31.5 percent growth in the first half.

Liabilities of industrial firms rose 6.5 percent on an annual basis as of end-Judy, according to the Statistics bureau.

($1 = 6.8740 Chinese yuan renminbi)

(Reporting by Min Zhang, Stella Qiu and Ryan Woo; Editing by Kim Coghill)

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