Data Points to Further Slowdown in China

The National Bureau of Statistics released its August survey of industrial companies today in China. Profits declined 6.2% from August 2011, and were off 3.1% for the eight months leading up to August 31. The August decline was the biggest of the year so far. Profits at state-owned enterprises were down by 12.7% while profits at foreign-owned companies were also down by 12.7%. Operating revenue at industrial companies increased by 10.2% during the January-August period. Declining profitability was blamed on falling demand in China and rising labor costs. The People's Bank of China, China's central bank, injected a record amount of funds into the financial system in an effort to keep the economy from stalling out. Steel production for the second ten days of September were also announced today showing a 2.7% decline from the same period in August and the lowest level since March at 1.52 million tons daily. Baoshan Iron & Steel, which trades in Shanghai, announced that it is suspending operations at one of its plants after demand for slabs used in ships and bridges declined. The Shanghai Composite Index rallied on Thursday after briefly falling below the 2000 mark yesterday for the first time since 2009. Rumors have been circulating that the government will institute measures to support share prices in the near future. The recent slowdown in China comes in the midst of an increasingly shrill territorial dispute with Japan that has resulted in the temporary shutdown of some Japanese manufacturing operations in China and a change of leadership of the Communist Party which has been marked by an unusual amount of public rancor.