July 16, 2019 / 7:18 AM / 2 months ago

Profit growth at China's central government-owned firms drops to single digits

BEIJING (Reuters) - 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% in April-June from a year earlier, sharply decelerating from a 13.1% gain in the first quarter, according to Reuters calculations based on first-half data released by the state assets regulator on Tuesday.

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% 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%.

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% 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.

Reporting by Lusha Zhang and Ryan Woo; Editing by Shri Navaratnam & Kim Coghill

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