China's economic woes are set to continue this week as Thursday's industrial profits data are expected to mark the start of a weakening trend, analysts told CNBC.
As the slowdown in the economy takes hold and China's industrial sector struggles with over-capacity, profit growth for the month of May likely slowed to 7-8 percent, analysts say, and will continue to soften in the coming months.
(Watch This: China Will Slow Further in Q2: Economist)
"I expect industrial profits will be weak over the next few months, dropping into negative territory by the end of the third quarter of this year," said Zhiwei Zhang, chief China economist at Nomura International, who forecasts industrial profits for May grew to around 8 percent, a 1.3 percent decline from April's 9.3 percent rise.
China's gross domestic product (GDP) growth in the first quarter of 2013 disappointed expectations, coming in at 7.7 percent, below hopes of 8 percent growth and reigniting fears of a hard landing in the world's second largest economy. Some economists are now concerned China will not meet its official target of 7.5 percent expansion for this year.
This week's cash squeeze, that saw money market rates skyrocket and led to panic among investors, highlighted the dangers facing China's economy and pointed towards a further slowdown as the government reins in rampant bank lending.
(Read More: China Is Right to Tame Credit Growth: Moody's)
Analysts told CNBC that a marked slowdown in certain segments of China's industrial sector, namely steel, are dragging overall profits down in a clear sign of a slowdown.
"Sectors like steel, cement and chemicals are being under-utilized, and suffering from over-capacity," said Rajiv Biswas, Asia-Pacific chief economist at research house IHS Global Insight. "This is because demand is sluggish and there is too much capacity. Profit conditions are suffering downward pressure."
(Read More: China's Credit Squeeze Deals Fresh Blow to Stocks)