Navigating hard times is a test of good or bad leadership, as the Chinese people know well. With the economic slowdown in China, corporate earnings are suffering. So is confidence. Over the past 30 days, three quarters of revisions to earnings of Chinese listed companies have been downwards, Thomson Reuters tallies. Gone are the days when breakneck growth could hide the flaws in management strategy.

As labour costs rise and competition increases, profitability has shrivelled to the lowest level in more than a decade. Net margins at Chinese non-financial companies could fall to 4 per cent this year, down from 5 per cent last year, Bank of America notes. Poor stock control means that slowing demand has pushed inventory days up by five over the past year to 67 days.

Investors in companies such as Li Ningin particular have felt the effects. No wonder they celebrated the departure of Zhang Zhiyong as chief executive last week by pushing up the share price. His focus on the short term meant that the sports wholesaler’s distributors were stuffed with clothing just as demand faltered and competition started to bite. The group is buying back stock and discounting heavily. Li Ning’s net income fell by two-thirds last year. TPG Capital, the private equity group, has now stepped in to try to restore confidence.