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China Sept industrial profits fall slightly but recover from Aug plunge

Group of workers at a small parts manufacturing factory in China.
Mick Ryan | Getty Images
Group of workers at a small parts manufacturing factory in China.

Profits earned by Chinese industrial companies fell 0.1 percent in September from a year earlier, data from the statistics bureau showed on Tuesday, levelling after a record 8.8 percent collapse in August.

Industrial profits - which cover large enterprises with annual revenue of more than 20 million yuan ($3.15 million) from their main operations - fell 1.7 percent in the first nine months of the year compared with the same period a year earlier, the National Bureau of Statistics said on its website.

"Even though the rate of industrial losses narrowed in September, given that downward pressure on the industrial economy continues, the industrial profit outlook is still not optimistic," the NBS said in the statement.

The NBS added that core business revenues had declined 0.5 percent at industrial firms, the first time in "many years"it had done so.

The announcement comes after China's central bank cut key interest rates and eased bank reserve requirements on Friday, following a GDP reading of 6.9 percent in the third quarter, beating expectations but still the lowest growth rate in decades.

The NBS said that the milder reading was thanks to a recovery from sharp losses due to currency fluctuations, which it blamed for the August plunge.

The People's Bank of China (PBOC) conducted a surprise devaluation of the yuan in August that saw the currency lose over 3 percent against the dollar in just a few short trading days.

Chinese firms continue to struggle with high debt levels -in particular in heavy industry and in inefficient state-owned enterprises - and this has meant that producer price deflation has effectively raised their real interest rate burden.

Major Chinese construction machinery maker Zoomlion Heavy Industry Co said earlier this month that it expected to report a loss in the third quarter due to the weakness in the yuan and a supply glut at home as the economy slows.

Zoomlion expects to report a net loss of between 190 million yuan and 290 million yuan ($30 million to $45 million) for the June to September period, compared with a net profit of 100.2 million yuan for the same year-ago period, the company said in a stock exchange filing.