CAPITAL investment by Chinese firms has ground to its slowest pace in three years, as a weakening economy, tight credit and prolonged trade tensions with the United States dent sales growth and cash reserves, a recent analysis showed.

Companies are also spending more days to turn inventory into sales and eking out smaller profit gains, the analysis showed.

Chinese firms raised capital spending by 1.6 percent in the three months through September versus the same period a year prior, the weakest growth in three years, showed the Reuters analysis of about 2,900 firms with market capitalization above US$100 million.

“The weak appetite to invest is a problem in terms of generating a strong recovery in the Chinese economy,” said senior China economist Julian Evans-Pritchard at Capital Economics.

Cash reserves at surveyed firms grew 5.6 percent year on year in the September quarter, the weakest since the first quarter of 2018. Moreover, the average number of days a company holds inventory before sale was 108 in the first nine months of the year, topping an annual average of 100 or less in the last four years.

Revenue grew 6.7 percent, the weakest in at least three years — the earliest period for which data from a comparable number of firms is available — while net profit rose 7.8 percent versus nearly 22 percent two years earlier.

The consumer discretionary and communications services sectors were among the poorest performers, with revenue shrinking 1.4 percent and growing just 1 percent, respectively.

Companies’ financial reports indicate consumers have been cutting back spending on vacations and big-ticket items.

(SD-Agencies)