China’s industrial profit growth cools as AI-linked sectors outpace others
Consumer-facing and property-related industries continue to suffer from subdued domestic demand
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[BEIJING] China’s industrial firms reported slower profit growth in July, with export-focused sectors riding the global artificial intelligence boom, while industries reliant on domestic demand remained under pressure.
Weakening demand at home has strained a broader recovery in the US$20 trillion economy, and external uncertainties including trade tensions and geopolitical risks continue to cloud the outlook, pressuring margins and profitability.
Profit at industrial firms grew 11.2 per cent last month from a year earlier, down from a 15.1 per cent increase in June, while profit for the first seven months slowed to 17.6 per cent from 18.7 per cent in the first half, data from the National Bureau of Statistics (NBS) showed on Thursday (Aug 27).
Profits slowed as rising input costs squeezed margins, even as revenue growth remained broadly stable, said Zhaopeng Xing, a senior China strategist at ANZ, adding that higher raw material prices pressured midstream and downstream manufacturers.
Despite the slowdown, export-linked, high-tech and industrial sectors remained bright spots.
The computer, communication, and other electronic equipment manufacturing sector jumped 110 per cent while the non-ferrous metal smelting, rolling processing sector leapt 91.8 per cent, leading profit growth in the January to July period.
Notably, fibre optics, optical cable manufacturing, and communication system equipment manufacturing soared by 468.4 per cent, 62.6 per cent, and 55 per cent, respectively, during the period.
Consumer-facing and property-related industries, however, continued to suffer from subdued domestic demand.
Kweichow Moutai, China’s largest liquor maker by revenue, posted a 2 per cent fall in H1 net profit, as cautious spending, the property market slump and tighter official outlays weighed on demand for premium liquor.
“The global environment remains complex and challenging, while the imbalance between strong supply and weak domestic demand remains a key constraint,” NBS statistician Yu Weining said.
Consumers’ reluctance to spend and businesses’ caution toward investment have renewed pressure on policymakers to shore up growth and bolster confidence.
China’s vice-finance-minister pledged in late August to roll out additional fiscal support measures in a timely manner after economic indicators pointed to a loss of momentum at the start of the third quarter.
Industrial profit figures cover firms with annual revenue of at least 20 million yuan (US$2.97 million) from main operations. REUTERS
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