By Qiaoyi Li and Ryan Woo
BEIJING- China’s industrial profits grew faster in July buoyed by high-tech manufacturing, even as sluggish domestic demand weighed on the recovery in the world’s second-largest economy.
Profits in July jumped 4.1 percent from a year earlier following a 3.6 percent rise in June, National Bureau of Statistics (NBS) data showed on Tuesday.
For the January-July period, profits expanded slightly faster at 3.6 percent compared with 3.5 percent in the first half, offering some hope of improving momentum amid dreary factory output, export, prices and banking lending numbers 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 high-tech manufacturing sector, including the making of lithium-ion batteries and semiconductors and related equipment, led the earnings growth with a 12.8 percent rise in the January-July period, the data showed.
Still, “domestic consumption demand remains weak while the external environment is complex and volatile,” said NBS statistician Wei Ning, suggesting more efforts were needed to boost domestic demand.
Tamer shipments last month raised a red flag over the country’s export-driven recovery and heightened concerns about frail domestic demand.
China’s July bank loans recorded the first contraction in 19 years, central bank data showed earlier.
Electric vehicle battery giant recorded faster profit growth in the second quarter, but its revenue fell at a faster clip during the quarter, as EV sales slow in the world’s largest auto market.
Amid lacklustre demand, a prolonged housing downturn and employment worries, Beijing is looking to pivot its stimulus toward consumption.
At a cabinet plenary session earlier this month, Premier Li Qiang vowed to boost the economy with a focus on consumption.
State-owned firms booked a 1 percent rise in profits in the first seven months, foreign firms posted a 9.9 percent gain, while private-sector companies saw profits up 7.3 percent , NBS data showed.
Industrial profit numbers cover firms with annual revenue of at least 20 million yuan ($2.80 million) from their main operations.
China’s exports grew at their slowest pace in three months in July, missing expectations and adding to concerns about the outlook for the vast manufacturing sector, while a rush to boost chip supplies before expected US tech curbs bumped up imports.
Analysts say China’s factories will likely face stiff pressure in the months ahead, hobbled by Western tariffs and demand woes while volatility in financial markets and US recession fears raise fresh challenges for policymakers trying to bolster a fragile economic recovery.
Outbound shipments climbed 7.0 percent in July from the year earlier, customs data on Wednesday showed, a slower pace of growth than June’s 8.6 percent rise and missing forecasts of a 9.7 percent increase.
Imports rose at a robust 7.2 percent rate, reversing a 2.3 percent decline in June and marking the strongest performance in three months. It also beat analysts’ expectations of a 3.5 percent rise.
The brighter imports figures were underpinned by Chinese firms’ rush to purchase chips ahead of expectations of further United States curbs on chips exports to the Asian giant
The slowdown in export growth adds to concerns about the outlook for the sector, analysts say, with many countries growing increasingly uneasy about China’s trade dominance.
The US, Europe and emerging economies from Turkey to Indonesia have raised tariffs and placed other barriers on Chinese products.
Washington announced in May plans to raise tariffs on an array of Chinese products on Aug. 1 but decided it would delay some of them.
