BEIJING — Profits among China’s industrial companies continued to grow in June, but at a noticeably slower rate, as strong export performance helped make up for lackluster spending at home, according to new government data released Monday.
Exports and factory output have been carrying much of the weight for the world’s second-largest economy. Still, ongoing weakness in consumer spending and the real estate market helped drag second-quarter growth down to its slowest pace in more than three years, keeping pressure on policymakers to do more to address the imbalance.
Profit growth at industrial firms slowed to 15.1% in June, down from 21.1% in May. For the first half of the year, profits climbed 18.7% compared to the same period a year ago — a slight dip from the 18.8% gain recorded through May, according to figures from China’s National Bureau of Statistics.
Lynn Song, chief economist of Greater China at ING, offered a cautiously optimistic take: “If this recovery can be sustained, it will be a good sign for the rest of the economy, as a return of profits growth could give companies room to resume wage growth.”
The data reinforces the picture of a recovery moving at two different speeds — with manufacturers benefiting from strong demand overseas, while industries dependent on domestic consumers continue to struggle.
NBS statistician Yu Weining pointed to ongoing challenges, stating: “The external environment remains complex and international commodity prices uncertain. Industrial firms also face weak demand and cash flow pressures.”
One clear sign of domestic strain: profits in automobile manufacturing dropped 19.5% during the first half of the year, as car sales fell for a ninth straight month in June.
Financial markets showed little reaction to the report, with Chinese stocks and the yuan edging slightly higher following the release.
Focus is now shifting to a Communist Party Politburo meeting scheduled for the end of July, a key gathering where investors hope to find clues about whether additional economic support measures are on the way.
However, expectations for a sweeping stimulus package have been scaled back, given the strength of exports and Beijing’s apparent preference for more targeted economic interventions.
The industrial profit data covers companies that generate at least 20 million yuan — roughly $2.95 million — in annual revenue from their core business activities.
