Chinese firms thrive despite slowdown

The mainland is on track to grow 7.5 per cent this year. That is great by the standards of any large economy but disappointing for China, which averaged double-digit growth over the past decade, according to World Bank data.

However, mainland firms are thriving in this era of slowing growth. In the third quarter, profit growth among the listed companies accelerated to its highest level since 2010, fuelled by easy credit and restocking, said Standard Chartered.

Overall, profits rose 21 per cent year on year, with non-financial firms seeing faster growth than their financial counterparts for the first time since 2010. Companies in the car, paper, petrochemicals, consumer electronics, materials, property, construction, technology, retail and conglomerate sectors all reported profit growth of more than 30 per cent.

A resilient private sector was driving this upturn, said CLSA China macro strategist Andy Rothman. In the first nine months of the year, profits among state-owned industrial firms increased 9.4 per cent year on year, while those at larger privately owned groups grew 17 per cent, according to CLSA analysis of official data.

When CLSA looked at data for the 200 largest non-financial companies listed overseas – in Hong Kong, the United States and Singapore – it found that private-sector earnings before interest and tax margins of 13 per cent for this year also outperformed the 8.4 per cent posted by state-owned enterprises.

“People don’t realise how entrepreneurial this economy is,” Rothman said.