After two years of spectacular growth, the outlook for Chinese corporate profit is dimming, threatening to delay any recovery of the weak mainland stock markets.

Ten fund managers, securities analysts and economists polled by Reuters this week predicted median profit growth for listed Chinese companies of 20 percent in 2008, down from a forecast late last year of 30 percent.

A weak global economic outlook resulting from the U.S. credit crisis, higher energy and commodities prices, a rising yuan, and Chinese curbs on bank lending to restrain excess investment are hitting profits harder than expected.

"The U.S. subprime crisis is slowing China's exports, while domestic investment has been hit by tighter economic policy, in particular the loan quota system," said Wu Haijun, Shanghai principal at Power Pacific of Canada, one of a limited number of foreign companies allowed to trade local currency shares. "The intensity of these factors was not expected last year."

The profit growth slowdown seems to have begun in the fourth quarter of 2007, a quarter earlier than the market anticipated.

With about half of the more than 1,500 listed mainland companies having reported 2007 earnings so far, total net profit is up 43 percent, compared with a consensus late last year of a rise of 50 percent to 60 percent.

That is a sharp slowdown from a 67 percent jump in the first three quarters of last year.

Topping the list of disappointments is PetroChina, which posted a 2.4 percent rise in net profit for 2007, compared with 7 percent predicted by analysts when the stock listed in Shanghai last November. Refining losses caused by soaring crude oil prices were mainly to blame.

Investors are expecting even worse results in the first quarter of this year from PetroChina and Sinopec, the largest Asian oil refiner. The two account for about 20 percent of listed companies' earnings.

Steel makers are also struggling with high raw material prices. Baoshan Iron & Steel, the biggest Chinese steel producer, posted a surprise 3 percent drop in 2007 profit last week - the first annual fall since 2001. It faces a 65 percent jump in iron ore prices starting this month.

Though Baosteel has managed to raise its product prices this year, analysts say this will bite into its sales to other industries and hurt profits at steel users like carmakers.

The appreciation of the yuan against the dollar, forecast to total 8.5 percent to 10 percent in 2008, was until recently viewed as a net positive for most Chinese industries, reducing import costs and spurring companies to move up the value chain.

But it now poses a serious threat to profits of lower-end exporters like toy maker Haixin Group and the clothing maker Youngor Group.

The slumping stock markets, where the main CSI 300 index is down 40 percent from a record peak last October, have themselves become a threat to corporate profits.

Last year, profits on stock investments accounted for about 15 percent of listed companies' net profits, analysts estimate, benefiting big investors like China Life Insurance in particular.

This year, investment profits are expected to be scarce, and some companies may post sizeable investment losses. Meanwhile, the market's slump is set to hit commission income and underwriting fees at brokerages like Citic Securities .

Mainland Chinese profit growth is likely to keep outperforming much of the world, so the panic among some investors may be excessive. In the United States, for example, analysts expect earnings for companies in the Standard & Poor's 500-stock index to fall more than 8 percent in the first quarter from the level a year ago.

The Chinese economy is still expected to grow 9 percent to 10 percent this year and at close to that rate next year, while corporate tax changes increase 2008 earnings by about 10 percent.

The banking sector, which provides about 30 percent of total profits, looks set to turn in another strong year as a tax overhaul, new sources of income and bond investment offset a slower economy and the loan quotas.