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China's industrial profits increased by 4.1% in July, driven by significant growth in high-tech manufacturing, despite challenges from sluggish domestic demand, according to the National Bureau of Statistics.
High-Tech Manufacturing Boosts China’s July Industrial Profits Amid Weak Domestic Demand
Although the recovery in the world's second-largest economy was impeded by sluggish domestic demand, China's industrial profits experienced more rapid growth in July, bolstered by high-tech manufacturing.
According to data from the National Bureau of Statistics (NBS) released on August 27, July profits increased by 4.1% from the previous year, following a 3.6% increase in June.
Profits expanded slightly faster during January-July, increasing by 3.6% compared to 3.5% in the first half. According to Reuters, this suggests that momentum may improve despite bleak factory output, export, prices, and banking lending figures reported earlier in August.
"The mild expansion in industrial profits showed that domestic macro policies are taking effect" as the factory sector is undergoing a transition and upgrade, said Zhou Maohua, a macroeconomic researcher at China Everbright Bank.
The data indicated that the high-tech manufacturing sector, which encompassed the production of semiconductors, lithium-ion batteries, and related equipment, exhibited the most significant earnings growth during the January-July period, with a 12.8% increase.
NBS statistician Wei Ning, however, indicated that "domestic consumption demand remains weak while the external environment is complex and volatile," suggesting that additional efforts were required to stimulate domestic demand.
China Faces Export Slowdown and Loan Contraction as Beijing Shifts Focus to Domestic Consumption
Last month's tamer shipments called into question the country's export-driven recovery and heightened concerns about the fragility of domestic demand.
Central bank data previously indicated that China's bank loans experienced their first contraction in 19 years in July.
The second quarter saw a more rapid revenue decline for the electric vehicle battery colossus CATL despite its faster profit growth. This was due to the slowdown in EV sales in the world's largest auto market.
Beijing is considering redirecting its stimulus toward consumption in the face of a protracted housing downturn, lackluster demand, and employment concerns.
Premier Li Qiang pledged to stimulate the economy by emphasizing consumption during a cabinet plenary session earlier this month.
According to NBS data, profits for state-owned firms increased by 1%, foreign firms by 9.9%, and private-sector companies by 7.3% in the year's first seven months.
Industrial profit figures include firms that generate an annual revenue of at least 20 million yuan ($2.80 million) from their primary operations.
