China's slowdown hurts corporate profits

BEIJING - China's economic slowdown has been impacting the country's corporate profits, as profit growth in the country's listed companies largely contracted in the first half of the year.

As of Friday, 1,003 companies listed on the Shanghai Stock Exchange or Shenzhen Stock Exchange posted a combined first-half net profit of 180.21 billion yuan ($28.38 billion), up 6.75 percent year on year, Saturday's China Securities Journal reported.

The growth figure took a major tumble compared to the figure reported on the same day last year, as the semiannual net profits of all 1,096 listed companies in 2011 had surged a substantial 36.14 percent from one year earlier.

Industrial sectors such as steel, construction and building materials have fared the worst, affected by the tightening grip over the real estate industry and cooling investment enthusiasm.

Aggregated net profits at eight steel companies that have unveiled their interim reports dropped by 68.49 percent year on year to 542 million yuan, the newspaper said.

Construction and building materials companies saw their combined first-half net profits shrink 28.67 percent from one year earlier, it said.

Profits of state-owned enterprises, the giants of the Chinese economy, fell 13.2 percent in the first seven months from the same period last year, according to statistics from the Ministry of Finance.

The sluggish economic growth has also meant disappointing passenger flows for the country's major airlines. Air China, China Eastern Airlines and China Southern Airlines all forecast their first-half net profits to fall by more than 50 percent.

Amid global economic instability and uncertainties, especially the eurozone debt turmoil, China's economy grew 7.6 percent in the second quarter from one year earlier, marking the lowest growth level in more than three years.

As of Friday, the country's key Shanghai stock index had tumbled nearly 15 percent from its peak this year.

To boost the economy, China's central bank has cut benchmark interest rates twice this year, in June and July, respectively, and it also lowered the reserve requirement ratio for banks in February and again in May.

Weak economic indicators for July, including the inflation rate, exports and industrial output, sparked speculation of further cuts in the benchmark interest rates and the RRR.