Chinese Baidu warns the economic slowdown could dentist sales

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BEIJING – Depreciation of confidence in the Chinese economy and regulatory closure in the private sector could create problems for the future

Baidu
Inc. of

BIDU 0.89%

revenue, warned executives with the search engine company.

It is another sign that the second largest economy in the world is facing adverse winds amid a series of trade between this and the US Baidu business, whose revenues are driven by advertisements of Chinese companies in the medical industry , retail and other sectors, is a barometer for the health of China's private sector.

"On any massive slowdown at the time, what we have said is that the level of confidence of the private sector, by entrepreneurs, is not so high," Baidu Robin Li CEO told analysts, as the company reported third-quarter earnings Tuesday in New York.

"If, say, over the next two months, the level of trust changes, things will change in a positive direction," Li said. "But we do not know exactly what will happen."

For the third quarter ended September 30, Baidu beat analysts' estimates and recorded 28.2 billion yuan, or $ 4.11 billion, in revenue, up 27% over the same period of the year. ;Last year. The growth was determined in part by an increase in users and by the time spent on the Baidu app, the company said. Analysts polled by FactSet have forecast revenues of $ 4.03 billion.

The quarterly net profit was 12.4 billion yuan, up 56% year-on-year.

But Baidu said that its revenue growth will probably slow down in the rest of the year. It expects fourth quarter revenue to increase from 15% to 20% compared to the same period of the previous year, compared to the 27% increase recorded in the July-September period.

Baidu's US depository's revenue increased 0.9% to close at $ 183.37 on Tuesday and slipped 0.75% in after-hours trading after the results were released. The shares have fallen by over 20% since the beginning of the year, similar to other Chinese technology giants.

Mr. Li said that while the current period may remind some people of the global financial crisis of ten years ago, he sees it differently. "Right now, this is more of the traditional sector, more of entrepreneur confidence, and this can change very quickly," he said. "In the longer term, I am still optimistic about the future of Baidu and the future of China."

China's economic expansion has slowed to its weakest point since the financial crisis. An official business tool in the Chinese manufacturing sector slipped to a two-year low in October.

Raymond Feng, an analyst at the Pacific Epoch research firm in Shanghai, said that while macroeconomic impact is already weighing on China's overall advertising market, online advertising is a little safer than traditional advertising.

However, given the macroeconomic slowdown and emerging competitors, including new online video platforms, Baidu risks facing increasingly fierce competition in online advertising, he said.

Another factor that could affect the company's earnings is the tightening of regulations by the Chinese government in various sectors, said Baidu's chief financial officer, Herman Yu.

Policies affecting sectors such as video games, real estate, financial services and online commerce could affect customers who advertise on Baidu's platforms, said Mr. Yu in the call for bids. While Baidu does not depend on any particular industry for advertising, he said, the cumulative impact on different industries, "a little here and there, summed together, leads us to grow probably not as fast as we would like. "

In the video game industry, regulators have not approved the sale of new titles since March, when a reorganization of the government began. The uncertainties still linger on which agency will regulate the industry.

Write to Yoko Kubota at yoko.kubota@wsj.com

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