China’s slowing industrial profits show rising debt hampering economy | Reuters

BEIJING Profit growth in China’s industrial firms slowed sharply as some key manufacturing sectors stumbled on weak activity and rising debt, suggesting the world’s second-biggest economy remains underpowered despite emerging signs of stability.

The September data from National Bureau of Statistics (NBS) underlined the daunting task facing policy makers as the nation’s vast manufacturing industry grapples with slack demand, overcapacity and ballooning debt.

Industrial sector profits last month rose 7.7 percent to 577.1 billion yuan, slowing markedly after surging 19.5 percent in August, NBS figures released on its website showed on Thursday.

Earnings in industries such as electronics, steel and electricity were hit by a significant drop in growth, He Ping, a NBS official said in a note accompanying the data.

“Although industrial profits have got back on track with more stable growth, unfavorable factors still exist,” He said, noting weak demand at both home and aboard, and delayed payments put a strain on firms’ cash flow.

The official also cautioned about rising debt levels in the coal and steel sectors, stressing the importance of controlling debt risks as capacity cuts and structural reforms get implemented.

China’s debt has soared to 250 percent of GDP and the Bank for International Settlements (BIS) warned in September that a banking crisis was looming in the next three years.

Recent data showed some signs of stability, with annual economic growth of 6.7 percent in the third quarter matching the previous quarter, as increased government spending and a property boom offset stubbornly weak exports.

But the profits data suggest China’s economy continues to face a host of challenges as authorities try to wean businesses off cheap credit-fueled growth, temper a surge in home prices and curb rising debt levels and shadow banking activity.

“If you look at the structure of the economy, it’s actually worsening because the growth of SOEs and public sector growth is relatively stronger, but private sector growth is much weaker. This shows the quality of the growth is deteriorating,” said Yang Zhao, economist at Nomura.


Profits in electricity tumbled 23.2 percent on-year, as electricity prices were adjusted lower and revenue growth slowed. Earnings in general and special equipment manufacturing also turned negative, dropping 10.8 percent on-year.

Total profits for the first nine months stood at 4.64 trillion yuan ($684.77 billion), up 8.4 percent from the same period a year ago, the same pace as in the January to August period.

Industrial overcapacity, mainly in the traditional sectors, have been a drag on profits in recent months and analysts say the outlook for earnings in the sector could hinge on the progress made by policy makers to cut capacity.

Beijing has embarked on a campaign to cut capacity in the coal and steel sectors in the economy’s most significant transformation in two decades.

The August profit growth – the fastest pace in three years – was helped by Beijing’s splurge on infrastructure projects and a booming real estate industry and so was seen as unsustainable.

China’s producer prices rose in September for the first time in nearly five years, thanks to higher commodity prices.

“Profits were largely driven by a restoration in commodity prices such as coal and steel,” David Qu, economist at ANZ said in Shanghai.

But Qu said the outlook for steel prices remain cloudy, as “the tightening in the property market means potential demand could shrink.” .

Indeed, a subdued property market is expected to drag on growth in the first two quarters next year, as policy makers introduce curbs to cool home prices.

“We are optimistic that stable growth will last through end of this year, because they have to finish the projects started earlier,” said Merchants Securities economist Xie Yaxuan in Shenzhen.

“But property and its related industries will definitely affect growth in the first or second quarter next year,” Xie said.

(Reporting by Yawen Chen, Elias Glenn, and Beijing Monitoring Desk; Editing by Shri Navaratnam)

Fast-Food Workers Could Face Robot ‘Armageddon’

For three decades now, the idea that robots will replace fast-food workers has been more of a pipe dream of tightwad business owners than a reality. But a group of engineers claims to have finally found a way to get rid of pesky humans once and for all.

Momentum Machines of San Francisco has invented a fully-automated contraption that can grind meat, slice tomatoes, grill patties, wrap fully cooked burgers and do pretty much anything else human fast-food workers can do. The machine is capable of cranking out 360 burgers per hour, according to Momentum Machines’ website.

The group plans to sell its invention to restaurants and, eventually, open its own chain to sell gourmet burgers at fast-food prices by eliminating the cost of paying line cooks. This, its website claims, will “democratize access to high quality food, making it available to the masses.”

“Our device isn’t meant to make employees more efficient,” co-founder Alexandros Vardakostas told Xconomy in 2012. “It’s meant to completely obviate them.”

momentum machines

A schematic of Momentum’s invention, which grinds custom blends of meat, then roasts patties, slices tomatoes, assembles the sandwich and even bags the final product.

Momentum, which declined to comment to The Huffington Post, doesn’t offer prices on its website, nor does it have a clear business plan or timeline for the chains it claims it will open.

“Unfortunately we are focused on other priorities at the moment and cannot divert resources to press,” Vardakostas told HuffPost.

A profile of Momentum, published Sunday by the robotics blog Singularity Hub, generated a new wave of interest in what conservative writers have dubbed the “minimum-wage-crushing” robots.

This comes at a time when the humans currently filling fast-food jobs are demanding higher pay and better working conditions, including calls for a $15 minimum wage. Those who oppose raising the lowest guaranteed wage argue that if it becomes more expensive to employ humans, restaurant owners will simply replace workers with robots.

Last year, the conservative Employment Policy Institute took out a misleading full-page ad in the Wall Street Journal showing a hachimaki-wearing Motoman SDA10 cooking food. This, they argued, would be the future of chefs if employers had to absorb the cost of a $15 hourly wage. But the Japanese company that made the humanoid machine told HuffPost last year that the robot “does not have the real capability for” kitchen work.

In fact, the fast-food industry has been inching toward automation for years, with little success so far.

In 1988, a clampdown on hiring undocumented immigrants shrank the pool of workers willing to flip burgers for $3.35 an hour, then the minimum wage. A spate of articles in newspapers, a popular form of distributing information at the time, predicted that pizza chains and burger joints would soon opt for R2-D2, a fictional droid from the Star Wars series, over workers.

“The fast food industry has no alternative; it will have to robotize,” Joseph Durocher, a professor of hotel administration at the University of New Hampshire, told The New York Times that year. “No longer can they afford the luxury of having human workers standing at the beverage bar with a cup or watching hamburger patties on a grill.”

Instead, lately, the trend has been toward more, not fewer, humans: Fast-food restaurants employ nearly 3.8 million people — the highest number in 10 years, according to statistics aggregator Statista.

“Ultimately robots are not going to replace humans in food service,” Darren Tristano, a food industry expert at the research firm Technomic, told HuffPost. “They would likely reduce some of the labor costs, but I can’t believe it’d be significant, even to a burger chain.”

But that doesn’t mean fast-food jobs are safe forever. A 66-page report published last week by the Pew Research Center found that 48 percent of experts surveyed believed that advances in artificial intelligence will displace more jobs than they create by 2025.

“If you look at the two great scourges of the modern world, the first being rampant unemployment and the second being income inequality,” Jerry Kaplan, an entrepreneur who teaches at Stanford University, said during a 13-minute segment broadcast in April on the radio show On The Media, “I think that a major cause of both of those is the accelerating progress of technology in general, and of artificial intelligence in particular.”

Kaplan said that while robot designers become increasingly wealthy by “skimming off the increased economic value they’re adding to society,” both blue- and white-color workers — from fry cooks to lawyers and doctors — will suffer.

“Robot armageddon is going to be economic,” Kaplan warned, “not a physical war.”

UPDATE: This story has been updated with a statement from Momentum.

Premarket Stock Trading – CNNMoney

Premarket Stock Trading – CNNMoney


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