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Smoke belches from a coal-fueled power station near Datong, in China's northern Shanxi province.

GREG BAKER/AFP/Getty Images

Profits at China’s industrial firms declined in annual terms for the third consecutive month in October, tracking sustained drops in producer prices and exports and underscoring slowing momentum in the world’s second-largest economy.

Industrial profit fell 9.9 per cent in October year-on-year to 427.56 billion yuan ($60.74 billion), data released by the National Bureau of Statistics showed on Wednesday, marking the biggest drop since January-February period and compared with a 5.3 per cent decline in September.

China’s industrial sector has been under pressure in recent months as slowing demand at home and the fallout from the Sino-U.S. trade dispute undercut earnings.

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Despite recent signs of progress in trade negotiations, there is growing uncertainty about whether Beijing and Washington can reach an agreement that would put off another U.S. tariff hike on Chinese goods scheduled to take effect on Dec 15.

U.S. President Donald Trump said on Tuesday that Washington and Beijing are close to agreement on the first phase of an agreement.

China’s producer price index, seen as key indicator of corporate profitability, fell by the sharpest rate in more than three years in October as prices for raw materials dropped. The country’s official manufacturing PM also showed a contraction in activity for the sixth straight month in September as new export orders declining for the 17th month in a row.

China’s exports fell in annual terms for the third straight in October, albeit at a slower-than-expected rate.

For January-October, industrial firms’ profits fell 2.9 per cent from a year earlier to 5.02 trillion yuan, compared with a 2.1 per cent decline in January September.

China’s central bank warned on Monday of increasing downside risks for the economy as growth continues to falter despite various fiscal and monetary stimulus introduced this year.

A Reuters poll of analysts tipped China’s growth to slip to a near 30-year low of 6.2 per cent this year and then ease further to 5.9 per cent in 2020, underlining the challenges faced by Beijing.

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Industrial firms’ liabilities increased 4.9 per cent from a year earlier to 66.74 trillion yuan at end-October, compared with a 5.4 per cent increase at end-September.

Private sector profits rose 5.3 per cent in January-October, slowing from 5.4 per cent for January-September.

The data covers firms with more than 20 million yuan in annual revenue from their main operations.

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