China’s industrial profits showed a positive trend in June, with a 3.6% year-on-year increase, following a 0.7% gain in May. The first-half earnings also saw an uptick, rising by 3.5%, which is an acceleration from the 3.4% increase in the January-May period. These numbers reflect a relatively rapid industrial production growth, along with a significant easing in factory-gate price declines since the second quarter.
Despite the positive industrial profit growth, the overall economy in China has been slowing down. The consumer sector, in particular, has been grappling with downbeat sentiment due to job market woes and a protracted housing downturn. More than half of the mainland-listed alcoholic beverage firms are expected to report a loss in the first half of the year, indicating the challenges faced by businesses in the current economic environment.
Amidst the economic challenges, some sectors have shown significant growth. Companies like Zhongji Innolight and Suzhou TFC Optical Communication, which are suppliers for U.S. chip giant Nvidia, have forecasted multi-fold increases in first-half earnings. These firms are benefiting from the global artificial intelligence build-out, despite rising trade tensions with the West.
To support the fragile economy, China has implemented monetary stimulus measures, including unscheduled lending operations at lower rates and benchmark lending rate cuts. The government has also announced plans to arrange funds from ultra-long special treasury bonds to upgrade equipment and promote a consumer goods trade-in campaign. State-owned firms reported a slight profit increase in the first half, while foreign firms recorded significant gains and private-sector companies also saw growth.
Overall, while China’s industrial profits are showing positive growth, there are challenges in the broader economic landscape. The country continues to navigate through a complex international environment, with a focus on boosting domestic demand and supporting businesses through monetary stimulus measures. Industrial profit growth may provide some stability, but ongoing efforts are needed to address the underlying issues affecting the economy.