A factory in Dongguan, a prefecture-level city in Guangdong province. Photo: iStock
Industrial profits dipped in China last month. Photo: iStock

China’s creaking economy is showing further signs of stress as the trade war with the United States drags on.

Data released by the National Bureau of Statistics on Friday revealed that profits at industrial companies dropped by 2% in August.

Triggered by weak domestic demand and fallout from the row between Beijing and Washington, industrial profits came in at 517.8 billion yuan (US$72.59 billion). That was 2% down compared to the same period last year and reversed the 2.6% gain in July.

“Given strong growth headwinds and elevated US-China trade tensions, we expect the economy to worsen before getting better and believe Beijing will likely ramp up its policy stimulus,” analysts from the Japanese bank Nomura said in a note as reported by the Reuters news agency.

Still, the dismal numbers were released just hours after media reports hinted that the next round of US-China trade discussions will take place in Washington on October 10-11. Again, that would be just days before new American tariffs are due to kick in.

“I think, it’s not next week, but the following week we’ll be having those talks,” US Treasury Secretary Steven Mnuchin said in an interview with Fox Business Network on Monday.

Later in the week, sources told the CNBC network that negotiations would reconvene in the second week of October.

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Slight progress has been made but crucial issues remain as US President Donald Trump underlined in an uncompromising speech earlier this week at the United Nations General Assembly.

In the meantime, the world’s second-largest economy is suffering.

GDP growth slowed close to a 30-year low of 6.2% in the second quarter as the trade dispute with Washington escalated.

For more than a year, the fallout from the row has acted as a brake on China’s slowing economy, which has been engulfed by dismal data during the past three months.

In August, growth dipped again across a broad range of sectors, from retail sales to industrial output, which plunged to a 17-year low. Big-ticket items such as new car sales have stalled while residential property prices have also suffered as consumer debt increases.

Moreover, the downturn is gaining pace just when Xi’s government is realigning the state-backed economic model to high-tech manufacturing and services. Consumption, not cheap low-value exports, is pivotal to Beijing’s blueprint.

“The August decrease in [industrial profits] mainly resulted from slowing growth in industrial production and sales, the expanding decline in prices of industrial products, and other adverse factors,” Zhu Hong, the senior statistician at the National Bureau of Statistics, said.

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