Negative real interest rates and the risk of a US slowdown are likely to affect the Chinese mainland's top earners in the next 18 months, according to Standard & Poor's Ratings Services.

The international ratings agency said in a report yesterday that leading Chinese firms are seeing strong growth, with earnings of the top 200 firms climbing 23.3 percent in 2006.

But it said factors including negative real interest rates, inflation and excessive debt-fueled expansion is likely to curb earnings.

Analysts said leading industry players will still see strong earnings when tax is cut next year.

"The overall economy in China may slow down next year," said Tao Dong, chief economist of the Asia-Pacific region for Credit Suisse First Boston.

"But when the government cuts tax further in March next year, some of the large-scale industry players will enjoy good earnings," Tao said.

The report said that despite a strong performance in the first half of this year and in 2006, companies will need to keep a close watch on risks.

"The Chinese economy seems immune to negative developments or threats from the rest of the world at the moment - obstacles like high oil prices and the liquidity and credit crunch," said Ryan Tsang, credit analyst at Standard & Poor's.

"But the market could be lulled into underestimating and underpricing risks during long periods of strong growth and high earnings. We are aware of the challenges ahead for Chinese companies," said Tsang.

Strong revenue and profits are concentrated in a handful of sectors led by oil and gas, according to the ratings agency. Total sales of the top 200 listed companies increased 25.5 percent year-on-year to 5.96 trillion yuan (US$792.6 billion) in 2006, while aggregate earnings climbed 23.3 percent to 443 billion yuan.

Ping Chew, managing director of corporate and government ratings in Asia for Standard & Poor's, said the extent of the economic slowdown will become clearer in the second half of this year after new measures to cool the economy are introduced.