China Industrial Profits Grow 18.7 Percent in First Half on Strong Exports

Profits at China’s industrial firms reached 3.95 trillion yuan in the January–June period, according to data released by the National Bureau of Statistics on Monday. The figures cover firms with an annual main business revenue of at least 20 million yuan from their primary operations.

While the first-half expansion remained solid, the pace slowed slightly from the 18.8 percent increase recorded during the January-to-May span. Industrial profit growth eased to 15.1 percent in June, marking a deceleration from the 21.1 percent gain registered in May. The latest June data extended a two-month cooling trend, as easing energy prices moderated the factory-gate price gains that had fueled earlier momentum.

Export Resilience Masks Domestic Weakness

The numbers point to a starkly divided economic landscape in the world’s second-largest economy. Manufacturers have capitalized on robust overseas demand and an artificial intelligence-driven investment cycle, but sectors reliant on domestic consumer spending continue to drag.

Persistent weakness in both consumption and the property sector weighed on second-quarter growth, pushing it to its slowest pace in more than three years and fueling continuous calls for government intervention. NBS statistician Yu Weining noted that the external environment remains complex while international commodity prices stay uncertain, adding that industrial firms also face weak demand and cash flow pressures.

The strain on domestic markets showed up clearly in the automotive sector. Automobile manufacturing profits tumbled 19.5 percent in the first half of the year, according to National Bureau of Statistics data, dragged down by car sales that declined for a ninth consecutive month in June.

Energy Price Normalization and Reflation Strains

This year’s broader profit rebound represents a significant swing from barely positive growth in 2025, helped by favorable comparisons against last year’s downturn. Earnings fell 3.6 percent in June of last year and dropped 2.8 percent in the first half of 2025. A reflation boost lifted factory-gate prices into positive territory during the second quarter for the first time since late 2022.

That price momentum has cooled. Producer prices dipped 0.3 percent on a month-on-month basis in June, marking the first decline since July 2025. Data from LSEG shows that normalizing tanker flows through the Strait of Hormuz pulled prices for oil, refined fuel, and petrochemicals lower.

Politburo Focus and Policy Expectations Ahead

With first-half figures on the books, market attention shifts to the Communist Party’s Politburo meeting slated for the end of July. Top leaders will review economic performance and set policy direction for the remainder of the year.

Expectations for a massive, broad-based stimulus package remain tempered. Resilient exports and Beijing’s preference for targeted easing have kept policymakers focused on curbing excess industrial capacity rather than launching massive monetary interventions.

Xing described the baseline expectation as a gradual policy ramp-up rather than a one-off stimulus push, noting that growth should remain supported by exports even as domestic demand lags behind.

Following the data release, Chinese stocks on the CSI 300 index and the yuan traded slightly firmer as markets digested the mixed signals of export strength and domestic softening ahead of the July policy gathering.