China’s industrial profits growth slowed to its weakest pace this year in July, as a rebound in factory-gate prices loses steam, according to data released Thursday by the National Bureau of Statistics.
Profits at industrial firms with annual revenues of more than 20 million yuan ($2.9 million) from core operations rose 11.2% in July from a year earlier, the slowest monthly expansion since the start of the year. For the first seven months of 2026, profits climbed 17.6% year on year, easing from the 18.7% pace recorded in the first half.
AI boom fueled earlier surge
The industrial sector has staged a marked turnaround this year, swinging from years of declines that began in 2021 and barely positive growth last year to double-digit gains. That recovery was largely fueled by the global artificial intelligence boom, which drove demand for computing and electronics equipment manufacturing.
Producer prices in June grew at their fastest pace in nearly four years, after rebounding in March from a multi-year slump that began in October 2022, according to LSEG data. But the reflation boost is now petering out. Much of the price recovery has been driven by surging global energy costs, while domestic demand remains sluggish. Factory-gate inflation slowed to a three-month low of 3.5% in July.
Weaker growth outlook
The slowdown in industrial profits mirrors broader economic weakness. China’s economy, the world’s second-largest, expanded in the second quarter at its slowest pace in more than three years.
Economists expect Beijing to step up targeted support to stabilize corporate profitability, as consolidation accelerates in sectors struggling with sluggish demand, intense competition, and bruising price wars.
Sophie Altermatt, economist at Julius Baer, said the deployment of existing fiscal resources will likely accelerate over the coming months, with potential additional easing steps if growth continues to slow. “This should provide some near-term stabilisation and put a floor under growth,” she noted. But a “strong cyclical rebound” remains unlikely, she added, as the property market slump, sluggish household confidence, and subdued private investment continue to constrain the recovery.
The data highlight the challenges facing policymakers as they try to nurture a durable recovery in corporate profitability amid persistent deflationary pressures and a fragile consumer sector.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/27/china-industrial-profits-july-factory-production-.html
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