Flaunt your wealth, or “falling stars,” has become an online craze in China. Posing in bizarre situations as if tripping from their luxury cars, rich kids are jostling to be photographed surrounded by their money, designer brands and jewelry.
As an analogy of the broader economy, it has merit.
Official data points to a distinct “stumble,” real or imagined, in a number of key areas. In September, profit growth at China’s industrial companies dipped for the fifth consecutive month.
The slowdown was in line with numbers released last week which showed factory output increased at its “weakest pace” in two years.
“If the Chinese economy continues to weaken, the corporate sector could face heavier pressure in terms of profit-making performance,” Huang Wentao, an analyst at the investment bank and brokerage, China Securities, said.
Last month, corporate profits did edge 4.1% higher to 545.5 billion yuan ($78.57 billion) from the same period a year earlier.
But that was less than half of August’s growth, figures released by the National Statistics Bureau showed at the weekend.
Already there are concerns that deteriorating corporate profits will eventually put pressure on jobs while slamming the brakes on consumer spending.
“Earnings in September were mainly pressured by a greater slowdown in production, and sales and declining price growth,” He Ping, a senior official at the NSB, said in a statement.
Similar to “flaunt your wealth,” there have been trips, slips and blips along an increasingly dangerous economic road, dotted with a myriad of hazards, such as rising trade tensions between China and the United States.
Fallout from President Xi Jinping’s credit crunch has also dragged down growth along with a tumbling renminbi.
Again, these are the ramifications of disappointing data. Last week, the numbers showed the economy in the third quarter expanded at the weakest rate since the Great Recession in 2009.
Moreover, mainland markets have been sucked into this vortex with each statistical stumble.
Nearly US$3 trillion has been wiped off the Shanghai Composite Index in the past nine months and $1.1 trillion in Shenzhen.
Bearing the brunt of the turmoil has been an army of 150 million individual investors, despite the People’s Bank of China pumping billions of dollars of liquidity into the markets.
On Monday, Shanghai and Shenzhen dropped by more than 2% as economic jitters persisted.
“Amid trade headwinds and domestic uncertainties, China’s economic growth [could] slow to 6.4% year-on-year in the fourth quarter,” economists at Citibank projected in a report.
“As lagging indicators, overall industrial revenue and profit should continue to soften accordingly,” they added.
Ironically, like the “flaunt your wealth” challenge, the broader economy could be in for a few more spills and chills before the end of the year.