China’s industrial profit growth slowed in July as weak domestic demand and rising input costs weighed on businesses, even as artificial intelligence-linked and export-oriented industries continued to record strong gains.
Profits at China’s industrial firms rose 11.2 percent year-on-year in July, down from a 15.1 percent increase recorded in June, according to data released by the National Bureau of Statistics on Thursday.
For the first seven months of the year, industrial profits increased 17.6 percent, easing from the 18.7 percent growth recorded in the first half of the year.
Analysts said the moderation reflected pressure on profit margins from higher raw material costs, while revenue growth remained relatively stable across much of the industrial sector.
Zhaopeng Xing, a senior China strategist at ANZ, said rising input costs were putting pressure on midstream and downstream manufacturers, making it harder for companies to sustain earlier profit gains.
Despite the broader slowdown, technology and export-linked industries continued to provide significant support to China’s industrial economy, benefiting from strong global demand associated with artificial intelligence.
The computer, communication and other electronic equipment manufacturing sector recorded a 110 percent jump in profits during the January-to-July period, making it one of the strongest performers.
Profits in the non-ferrous metal smelting and rolling-processing sector also surged 91.8 percent over the same period, reflecting strong demand for materials used in advanced manufacturing and technology-related industries.
Within the technology supply chain, fibre-optic manufacturing recorded an extraordinary 468.4 percent increase in profits, while optical cable manufacturing rose 62.6 percent and communication system equipment manufacturing climbed 55 percent.
However, industries dependent heavily on Chinese consumers continued to face difficulties as households remained cautious about spending amid economic uncertainty and lingering concerns over the property market.
Kweichow Moutai, China’s largest liquor maker by revenue, reported a two percent decline in first-half net profit, with weaker consumer spending, the property downturn and tighter official expenditure affecting demand for premium liquor.
The contrasting performance highlights a growing divide within China’s industrial sector, with technology, manufacturing and export-oriented businesses benefiting from global demand while consumer-facing and property-related industries struggle to recover.
China’s weak domestic demand remains a major challenge for policymakers, as consumers’ reluctance to spend and businesses’ caution toward investment continue to weigh on economic momentum.
The government has signalled that additional fiscal support could be introduced as economic indicators point to a loss of momentum at the beginning of the third quarter.
The latest industrial profit figures cover companies with annual revenue of at least 20 million yuan (US$2.97 billion) from their main business operations, offering a key measure of the health of China’s manufacturing sector.
