Mainland state-owned firms posted their fourth straight month of earnings decline, as incomes fell 13 per cent last month from September, hit hard by Beijing's monetary tightening measures.
Central and provincial government-owned firms posted a total profit of 159.57 billion yuan (HK$959 billion) last month, compared with 182.89 billion yuan in September, 191.9 billion yuan in August, 210.3 billion yuan in July and 216.8 billion yuan in June, according to estimates based on figures from the Ministry of Finance. Last month's earnings are 26 per cent below that of the peak in June. Even so, earnings in the first 10 months of this year rose 16 per cent to 1.87 trillion yuan from a year ago. The month-on-month decline in earnings has been most prominent in the steel, petroleum, tobacco, non-ferrous metals and crude oil sectors.
However, the transportation, chemical and construction sectors posted higher earnings.
To curb inflation and cool the property boom, Beijing has raised the benchmark interest rate three times this year and it raised banks' capital reserve ratio six times. Also, Beijing imposed measures to limit home purchases in major cities.
Such efforts have slowed the mainland's economic growth to 9.5 per cent in the second quarter, from 9.7 per cent in the first. Inflation also eased to 5.5 per cent last month, from 6.5 per cent in July.
However, as the tight credit environment has severely affected small companies, Beijing has switched to a 'selective easing' policy, by instructing banks to lend more to small- and medium-sized firms, and infrastructure and social housing projects.
New loans last month rose to a four-month high of 586.8 billion yuan, up from 470 billion yuan in September. 'As long as the effect filters through in the coming months, China's domestic resilience should support around an 8.5 per cent to 9 per cent year-on-year gross domestic product growth rate,' HSBC economist Qu Hongbin wrote recently.
'As such, China has no risk of a hard landing in our view.'
A Reuters poll showed analysts expect the mainland's GDP to weaken to this percentage next year, from 9.3 per cent this year.