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As reported by Reuters, profit growth for major Chinese industrial firms has slowed to a five-month low as markets continue to grow increasingly concerned about declining demand within China’s domestic economy as China and the US continue to face off in a bitter trade war battle.

Key highlights

Chinese industrial companies have had to slow the pace of their expansion plans, with profit margins on the decline as demand for raw materials and industrial products backslides. Industrial profit growth through August clocked in at just 3.1%, a sharp turnaround from the initial 15.5% increase forecasted by Capital Economics.

The Chinese government’s current deleveraging campaign is putting pressure on domestic demand and consumption, and the effects are potentially worrying given that China is trying to strongarm their way through a trade battle with the US, forcing banks to keep lines of credit open to targeted firms and businesses.

“Corporate profitability will continue to worsen, as the recent policy boost to spur investment growth will take time to set in,” said Yang Yewei, an analyst at Southwest Securities. He noted both inventories and money owed to companies had edged up, a sign that business conditions were becoming increasingly challenging. – Reuters