High-tech manufacturing fuels surge in China’s July industrial profits

July profits jump 4.1% YoY vs. 3.6% YoY in June.

China's industrial profits increased at a faster pace in July, boosted by high-tech manufacturing despite sluggish domestic demand that continues to weigh on the recovery of the world's second-largest economy.

July's profits climbed 4.1% year-over-year, following a 3.6% increase in June, according to National Bureau of Statistics data.

From January to July 2024, profits grew slightly faster at 3.6%, compared to 3.5% in the first half of the year. This has generated optimism for improving momentum amid grim factory output, export prices, and banking lending numbers reported in early August.

Zhou Maohua, a macroeconomic researcher at China Everbright Bank, noted that the modest extension in industrial profits suggests that domestic macroeconomic policies are starting to take effect.

Leading the earnings growth with a 12.8% increase in January-July 2024 was the high-tech manufacturing sector, which includes the production of lithium-ion batteries, semiconductors, and related equipment.

However, NBS statistician Wei Ning emphasized that domestic consumption demand remains weak, while the external environment is complex and volatile. He suggested that more efforts are necessary to boost domestic demand.

Last month's low-volume shipments have raised concerns over the country's export-driven recovery and growing worries about fragile domestic demand.

For the first time in 19 years, China's July bank loans recorded a contraction, according to central bank data.