Profits are Plunging in China

“Chinese companies are warning they will be reporting either losses or declining profits for the first half.  Corporate results are forcing stock markets down and pointing to a contraction in the country’s economy.

China Rongsheng Heavy Industries, China’s largest private shipbuilder, lost 19% of its value when it issued a profit warning at the end of last month.  Yards in the country are in a terrible state—the industry’s orders for new vessels in May were half of what they were a year earlier—yet Rongsheng’s poor prospects had largely been discounted.  The company’s shares tumbled not only because it hadn’t announced any shipbuilding orders this year but also because the U.S. Securities and Exchange Commission implicated Zhang Zhirong, its chairman and founder, in an insider trading scheme relating to the acquisition of Canada’s Nexen by CNOOC, a unit of one of China’s state oil giants.

We can perhaps dismiss Rongsheng as an aberration, but poor results at other companies are indicative of the state of the country’s increasingly troubled

economy. ”

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