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Chinese companies face pressure

Earnings at China’s industrial firms grew at their slowest pace in seven months in November, as demand and producer price gains eased in further confirmation of ebbing growth in the world’s second-largest economy.

The lower income underscores a delicate balancing act for authorities as they extend a campaign to reduce China’s reliance on credit-intensive investment without imperiling the economy.

Profits in November rose 14.9 per cent, the slowest monthly growth rate since April’s 14 per cent.

Earnings were pressured in November by a slower pace of price rises compared to previous months. November’s decline in producer price inflation to 5.8 per cent from 6.9 per cent in October was one of the biggest of the year.

Previous price increases were concentrated in upstream industries like coal and steel. Inflation in those areas is slowing, and the transmission of higher prices to downstream industries hasn’t been very strong, which hurts profit margins.

While the industrial sector has enjoyed a year-long construction boom that has fueled demand and prices for building materials in a boost to growth, a battle to clean toxic air and a crackdown on financial risks have started to drag on China’s economy.

 
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