China’s industrial profit growth hits 7-month low in July

Mucahithan Avcioglu

China’s industrial profit growth slowed in July to its weakest pace in seven months as subdued domestic demand and a broader economic slowdown weighed on manufacturers, official data showed Thursday.

Profits at major industrial firms rose 11.2% year-on-year in July, according to the country’s National Bureau of Statistics.

During the January-July period, industrial profits increased 17.6% from a year earlier, losing momentum from an 18.7% rise recorded in the first half of the year.

Despite the slowdown, corporate profitability has improved sharply after years of declines since 2021 and only marginal growth last year, largely supported by strong demand linked to the global artificial intelligence boom.

Profits in the integrated circuit industry, led by computing and data-storage chip manufacturers, rose 18.5% in the first seven months of the year. The industry accounted for more than 80% of profit growth across the electronics sector, the bureau said.

A more than fivefold increase in profits among optical fiber manufacturers also supported earnings in advanced manufacturing.

Raw-material producers recorded a 55.2% annual increase in profits during the January-July period. The petroleum-processing industry returned to profitability as supply disruptions in the Middle East lifted prices for downstream chemical products.

However, industries exposed to the country’s struggling property sector and weak household demand remained under pressure.

Profits in furniture manufacturing plunged 58.2% during the first seven months, deepening from a 52.7% contraction registered in the January-June period. Steel and cement producers were also hit by declining property and infrastructure investment.

China’s factory-gate inflation slowed to a three-month low of 3.5% in July, indicating that a recent rebound in producer prices may be losing momentum. Much of the earlier price recovery was driven by higher global energy costs rather than stronger domestic demand.

The world’s second-largest economy also registered its slowest growth in more than three years during the second quarter.