While total gains reached 4.58 trillion yuan, the pace of recovery for the nation's manufacturers is moderating due to margin pressures and soft domestic consumption.
Growth of China’s industrial profits slows amid rising input costs
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Latest data released by the National Bureau of Statistics on Thursday confirms that the trajectory of China’s industrial profits remains positive, though the rate of expansion has begun to temper. For the first seven months of the year, industrial firms saw their combined profits rise by 17.6 percent year on year, reaching a total of 4.58 trillion yuan (US$630 billion), according to the Xinhua news agency.
However, a closer look at the monthly performance of China’s industrial profits reveals a slight deceleration. Profit growth for industrial firms hit 11.2 percent in July compared to the same period last year. This figure represents a cooling from the 15.1 percent increase recorded in June. Similarly, the cumulative profit growth for the first seven months of the year slowed from the 18.7 percent rate observed during the first half of 2026.
[See more: China’s services sector sees first-half growth despite July moderation]
According to Xing Zhaopeng, a senior China strategist at ANZ, this moderation is largely attributable to rising input costs, which have effectively squeezed corporate margins. Even as revenue growth has remained broadly stable, higher raw material prices have placed significant pressure on both midstream and downstream manufacturers.
Despite the volatility surrounding China’s industrial profits, the broader data suggests that the sector is still navigating a period of adjustment.
Navigating the headwinds of China’s industrial profits
Despite the broader slowdown, specific sectors continue to demonstrate significant resilience. Export-linked, high-tech, and industrial sectors have emerged as bright spots, performing well above the average. For instance, the computer, communication, and other electronic equipment manufacturing sector jumped by 110 percent, while the non-ferrous metal smelting and rolling processing sector leapt by 91.8 percent.
Other areas of high-tech manufacturing were even more robust. Notably, fibre optics, optical cable manufacturing, and communication systems equipment manufacturing soared by 468.4 percent, 62.6 percent, and 55 percent, respectively, during the period, in another bright spot for China’s industrial profits.
Bureau statistician Yu Weining noted that the global environment remains complex and challenging, adding that the imbalance between strong supply and weak domestic demand remains a key constraint for the economy. In response to these indicators, which suggest a loss of momentum at the start of the third quarter, the nation’s vice finance minister has pledged to roll out additional fiscal support measures in a timely manner, aiming to bolster the sustained recovery in China’s industrial profits.
